Interaction is one of three flavors of scenario, alongside exploration and combat. Interaction scenarios resolve situations where the PCs are trying to convince others of something, whether true or false, and whether through logic and reason or through threats and intimidation.
There are two ways to win most interaction scenarios: advance the debate counter to the victory position, or defeat all enemies. Interaction scenarios are lost by having the debate counter reach the defeat position or having all PCs defeated. Additionally, most interaction scenarios feature a round limit; often the PCs lose if the round limit is reached, though in other cases the debate counter is evaluated at that time instead. Other victory and defeat conditions may also exist specific to the scenario.
Interaction scenarios are almost never life-or-death. Rare exceptions might include captive and otherwise helpless PCs pleading for their lives. In these cases, PCs may spend Karma to help out in some fashion; the mechanics for this will be unique to any such scenario but will commonly include options such as adding to the round limit, halting a debate counter move, or recovering from being defeated.
Interaction scenarios feature a Stage divided into positions. Sometimes the Stage is abstract, defining the various conversation topics and the like, while other times the Stage denotes actual physical locations. Time in interaction is highly varied depending on the specifics of the situation; a round may last anywhere from 10 seconds to an hour of time in the game world.
For more information, see Player's Guide Chapter 6: Interaction.