A hot spot is a local area whose temperature departs from that of its surroundings or of the equivalent phases. In electrical installations the usual cause is a connection that has lost its tightness or has oxidised: as the contact resistance rises, the power dissipated grows with the square of the current and the spot heats up.
It matters because the process feeds on itself. Heat accelerates oxidation, oxidation raises the resistance and that raises the temperature again, until the contact melts or works loose. Caught in time, the fix is a retightening; caught late, it is a failure with an outage.
It is located by thermography, always comparing between phases and noting the load at the time of the inspection, because the heating depends on it. Standard practice grades severity by the temperature rise over the sound phase: a few degrees calls for follow-up, tens of degrees call for immediate action. In a transformer, the winding hot spot is also a calculated quantity that determines the life of the insulation.