Difficulty is a level you can set for missions before undertaking them. There are three levels of difficulty available: Normal, Advanced and Elite. This impacts the challenge you will have facing enemies in the mission and the rewards you receive.
Normal is the default setting. Enemies are relatively easy to defeat and you suffer no injuries when defeated. You receive standard mission rewards.
From advanced you gain a chance to suffer injuries when defeated in combat. These injuries impair your performance until healed by a Doctor or by a kit. Enemies are more challenging but XP received and drops from enemies are improved. The standard rewards your receive when handing in a mission are unchanged, however.
Elite setting is for the most challenging experience with greater rewards but a far higher demand from your build (30-50k damage per second minimum depending on the TFO). The “Battle of Korfez” TFO is unique in only being available on Elite difficulty.
Setting your difficulty
To change your base difficulty level for solo content, go to your "Options", and under the basic tab is a setting to change your default difficulty level. TFO content is set when you join the queue; at the bottom of the TFO interface you can select to filter difficulty setting. Note not all TFOs are available at all levels of difficulty, check the icon on the mission's TFO listing to see what level it is available at.
The difficulty setting of the leader applies to the team and difficulty setting does not affect PvP content.