Mind-affecting effects are things that, as the name rather implies, mess with a character's mind in some way. A good example are the Fear/Horror/Insanity tier of Force powers, or some of the mind/beast-tricking ones from the second game.
Originally Posted by Ctrl_Alt_Del
To be fair, the AI rarely uses any Force power at all.
Then you must not have played the game recently... it's quite common to see enemy Dark Jedi use at least several Force powers per fight. Horror/Insanity is a favorite of some of the higher-level ones; it's definitely worth wearing some protective items against mind-affecting effects.