Exploiting is taking advantage of something involving the game mechanics to gain something, be it XP, loot, or whatever, that you wouldn't normally be able to get.
Some examples of exploiting (this is not an exhaustive list, just some instances):
Finding that a quest is repeatable for its quest reward and repeating it (None of Thain's scripted quests should be repeatable except the quests for, special potions and item re-charging).
Taking advantage of poorly implemented NWN mechanics such as monsters that don't fight back when attacked to gain easy XP from killing monsters.
If you find an exploit, please report it to a DM ASAP, preferably in a PM, so that it can be fixed. DO NOT EXPLOIT IT YOURSELF under any circumstances.
If you are caught exploiting by a DM, anything gained from the exploiting will be removed. If you are found repeatedly and knowingly exploiting, despite having been told not to, you will receive a ban from Thain, as exploiting the server to cheat other players is about as disrespectful as it gets.
'Muling' means transferring items or gold gained by one of your characters to another one of yours, either by putting them on the ground and switching to the other char, or by letting another PC or NPC merchant hold them for you.
It is not allowed on Thain, as it confers an unfair advantage to starting characters of older players to those of fresh ones. Making up a role-playing story to explain an item transfer does not make it allowed. If you think you have an important reason for an item transfer, ask a DM about it.
And remember while in-character gifts are permissible between characters of different players, please keep them level appropriate.