"Pick Up Group"
The most commonly used meaning of "PUG" is "Pick Up Group," a group assembled from random players on the spur of the moment rather than put together by players who already know each other through a guild or other means. For example, you may see players advertising in one of the game's chat channels that they are looking for members for a PUG to a specific mission or area.
"Person Unaffiliated with Guild"
The second meaning of "PUG" is more rarely encountered and typically only found when dealing with voice-chat services such as Ventrilo or TeamSpeak. Many guilds in "Guild Wars" will have their own Ventrilo or TeamSpeak server; when people who are not members of the guild are allowed to join these servers, they are labeled a "Person Unaffiliated with Guild," or "PUG" for short.
Considerations
Pick up groups can be an effective way of fulfilling the objectives of missions that you are unable to complete alone, but they also have their limits. Because they are composed of players who have never before played together and who are not typically using voice communication, they are limited in the amount of coordination that they can achieve and, therefore, may not be able to complete the hardest missions available in the game.
Perception
Although pick up groups may have a poor reputation due to their potentially low rate of success, not all pick up groups are bad. A player who has to rely on pick up groups to complete missions is not necessarily unskilled; it may simply be the case that he plays very rarely or at odd times and, as a result, can't participate in the organized activities of a guild.