Liquidity describes the depth and activity of the order book. A pair is "liquid" when there are many buyers and sellers at every price level, so large orders fill without moving the market. EUR/USD during the London–New York overlap is the most liquid market on earth; exotic pairs in the Asian session are among the least.
Liquidity varies by time of day. London and New York opens are peak liquidity windows for majors. Late Asia (before Tokyo opens) is the thinnest period — spreads widen, slippage increases, and gaps are more common. Traders running high-frequency or scalping strategies usually restrict themselves to peak-liquidity hours for this reason.