Revision deletion allows the edit history of pages and logs to be changed by users with custodian rights. This is generally only done to remove copyright violations, highly inappropriate (not just controversial) material such as outing of user identity, serious libel, or highly offensive content. A deleted revision appears as
struck, grayed-out and italicized text.
Its use should be kept to a bare minimum as revision deletion renders information previously in public view to that only available to custodians. Such deletions require a much higher level of accountability on the part of the custodian as the choice to significantly reduce transparency in the edit history may be desirable or even necessary! Revision deletion is more work than mere reversion or whole-page deletion, and can make a mess of the logs. There should be a good reason for it.
The most common reason is to remove from public visibility an edit that can cause harm, such "outing" an editor, revealing real-life identity and, worse, things like location and telephone number, employment, etc., and other kinds of harm may be possible as well. Theoretically, copyright violation could be a possible reason because anyone can link to a Wiki history and if the wiki is being used to host seriously problematic material, such as codes to crack copyright protection, through a link to page history, it could be quite appropriate to revision-delete it.
Normally, even gross incivility remains in the history, as well as vandalism etc. Serious libel could be another exception that might be possible. It's better if edit history is there, usually, so that the problematic contributions of an IP or registered editor can be reviewed if needed. If you think someone is being immediately harmed, in real life, then you might be obligated to act in advance of review, but if a matter is serious enough to warrant deleting revisions, discuss it with others, openly (without directly revealing problem content, of course, but pointing to the location so any custodian can read it).
Users may ask you to revision-delete edits that reveal their IP address, due to autologout, as an example. Generally, this should be honored, and promptly, but I'd say there should be a record of it, say on the user Talk page, so that admins can notice if it's needed later. (The tool allows simply hiding the identity of the editor.) If there is seriously problematic information revealed, it may be appropriate to ask for oversight, and how to do this without creating a big red flag in the meantime is beyond the scope of this answer... For suppressible information, one should contact the stewards at Meta-Wiki and state their request privately there. Information that is suppressed won't even be visible even to custodians.
Currently, until local information is more developed, it recommended that WV users consult the Wikipedia guidelines about using RevisionDelete, Wikipedia:Revision deletion.