“Tier requirements” are a set of requirements a user needs to meet in order to be placed in that tier. They are generally for KYC (know your customer) verification purposes - information you need in order to verify the identity of your user. Examples of requirements are: a user adding their first name, verifying their email address, having their uploaded identity document verified, etc. Users will add and upload this data through the wallets.
Tiers and tier requirements allow you to add limits to what unverified users can do as well as disable certain subtypes/currencies (and thus transaction flows). This is to minimize risk within your system. You can also set different fees for different tiers
The system always places a user into the highest tier they can go based on requirements. If a user doesn’t meet the tier requirements for any tier, they are placed in no tier. To avoid this happening it is best practice to have no requirements for tier 1 - any unverified users will then be on tier 1 by default and will be subject to any risk mitigating limits you have put in place.