Interaction is an informal game term with two separate meanings.
An interaction is the way two cards work together. Oftentimes, this refers to combos: for example, Rapid Reload (15U89) and (two or three copies of) Demoralized (11U114) interact to create a loop that allows you to exert all of your opponent's companions until they are exhausted.
Interaction (or counterplay) can also refer to the ability of card, strategy, or deck to interfere with your opponent's gameplan. A deck using Ithilien Blade (15C62) or Stewards’ Legacy (13U75) can often proactively interfere with the Shadow player's ability to execute their gameplan at all. Slaked Thirsts (7U14) interacts with Gríma, Wormtongue (4R154) by exhausting him before he has a chance to interact with your Dwarf and the cards borne by him. This usage is rare in LOTR TCG, but common in other games with more abilities that interrupt the opponent's turn, such as in the Magic: the Gathering community.