"Risk-on" describes periods where investors are comfortable taking on more risk — buying growth-sensitive assets and higher-yielding currencies in search of better returns. "Risk-off" is the opposite: investors retreat toward safety, often selling the same growth-sensitive assets and currencies they were buying just days before, with little new information about those specific assets driving the move.
What makes this mode so important to understand is that it can override a currency's own fundamentals entirely for a session or more. A currency with a hawkish central bank and strong domestic data can still fall sharply in a risk-off wave, simply because it happens to be a high-beta currency that gets sold whenever broader sentiment sours — the move has very little to do with anything happening domestically.