Twitter Lists are not as well known or used by some folks as some other Twitter features, but it is an important function. It allows Twitter users to create custom groups of Twitter accounts. It is intended as publically available groups: "My favorite friends", "Best Sports News Sources", etc. It is something that can tell my friends about other Twitter users.
In reality it is mostly used as a heavy promotional tool, with its core ability to feed off other user's ecosystem.
Let's say you have a competitor. You have a twitter account with 10,000 followers. You are doing really well. Lots of engagement: mentions, RTs - things are going great. Your competitor on the other hand is not that well known, yet he does understand that the 10,000 followers that you have are his prime target.
These are the folks that have shown interest in what you do and thus will be extremely interested in what he does. Hmm, what can he do to attract this crowd effectively? He can try to follow each one of the folks that you follow.
Might help some - but doubtful to have massive impact. It is quite direct, too, and may not result in much attention. There is something very sneaky that he can do however! He can create a Twitter List and add you to it. Seems innocent enough, but now he is tapping into your ecosystem, you and him now belong to the same group of "Best Companies in Business" or whatever name he decides to give to this list. The two names will now be mentioned in the same sentence. It will come up in the searches, etc, etc.
Dealing with this tactic is easy but does require timely reaction. You can simply block that user. That removes you from that list and removes any notion that the two entities are somehow related to one another.
This is one of the features we offer at Social Report. You can monitor your twitter lists all the time. We also send you a daily email with a list of new groups via email.