Being Chilled is when a Validator is removed from the active node pool, meaning they can no longer produce and validate blocks. There is no actual penalty resulting in a reduced staked balance (known as Slashing); they simply can't earn any rewards until they signal their intent to validate again and are elected into the Active Validator pool for an Era.

This is most likely to occur when a Validator experiences extended periods of downtime that are isolated (don't involve other Validators or the network as a whole).

The purpose of Chilling is to alert a Validator that their node is not performing to the expected standard and that it requires the node operator's attention/intervention.

As such issues generally don't pose a significant risk, the Validator (and its nominators) are not Slashed; instead, the Validator is restricted in its ability to earn rewards; Nominators are minimally affected (unless they are only nominated to the misbehaving Validator being Chilled) as their stake will be allocated to other Validators from their Nominated Validator pool.