A counter hit, or CH, occurs when your attack interrupts or trades blows with your opponent's attack. Almost all moves inflict slightly more damage on CH. Some moves have special CH properties like launching, knocking down or gaining extra + frames. In many cases, a string follow-up that's not guaranteed on normal hit will become guaranteed on counter hit.
Characters focused on counter hits include Law, Steve, Josie and Bryan. Although almost every character has a big reliability on counter hits.
The most common counter hit tool is known as the magic 4, an i11 or i12 high CH launching kick.