Outlaws are humans that have rejected their normal, functional place in society. They have all turned to crime for different reasons. Some of them were seduced by the promise of great wealth, others were convinced to join a cult, and still others feel like they were rejected by the humans that they trusted the most. Whatever the cause, they now steal and kill without mercy. Their only thoughts are for their own personal gain. Since they do look like players, many newcomers take them for PKs (especially the hunters).
Outlaws can be found in many places, but they seem to have congregated around the Outlaw Camp and Dark Cathedral. The collapse of the Dark Cathedral may have something to do with the large number of outlaws in this area.