"Immersion" refers to a state of mind where a player does not need to actively suspend disbelief in the fictional universe, and where role-playing flows as naturally and easily as if you really were the character.
Immersion is often held up as the goal, or the most important means, of the Nordic style of larping. As a result, it has several different meanings and interpratations, many of which are ideologically charged and some of which are contradictory.
Further Reading
Pohjola, The Turku School Pohjola, Inter-immersion Bøckmann, Three Way Model Harvianien, multi-tier immersion theory (??) Holter, Stop saying immersion