A mule is a character that a player uses to store less frequently used items due to the limited space in the vault box (i.e. Xunlai Chest). A mule usually has a belt pouch and two bags with Runes of Holding attached to efficiently store the inventory overflow.
Not all mules are created with the initial purpose of storing excess inventory -- some are simply characters created for normal play, but are not played often. Retired or inactive characters are often turned into mules.
Some players even have mule accounts — additional accounts for the sole purpose of creating characters for extra storage space.