The concept of deterrence can be defined as the use of threats by one party to convince another party to refrain from initiating some course of action.
A threat serves as a deterrent to the extent that it convinces its target not to carry out the intended action because of the costs and losses that target would incur.
In international security, a policy of deterrence generally refers to threats of military retaliation directed by the leaders of one state to the leaders of another in an attempt to prevent the other state from resorting to the threat of use of military force in pursuit of its foreign policy goals. Deterrence requires knowledge of an adversary's capabilities as well as an own credible posture, bulit on apt own capability and strategy, including for retailiation after an attack.
- http://en.wikipedia.org/wiki/Deterrence_theory (Wikipedia article on deterrence with references)