An excerpt from SBA on what general liability actually is. SBA.gov

What is General Liability Insurance?

Liability insurance (also known as Commercial General Business Liability) protects a company’s assets and pays for obligations – medical costs, for example –incurred if someone gets hurt on your property or when there are property damages or injuries caused by you or your employees. Liability insurance also covers the cost of your legal defense and any settlement or award should you be successfully sued.  Typically these include compensatory damages, nonmonetary losses suffered by the injured party, and punitive damages.

General liability insurance can also protect you against any liability as a tenant if you cause damage to a property that you rent, such as by fire or other covered loss.

Finally, it can also cover claims of false or misleading advertising, including libel, slander, and copyright infringement.

Generally businesses only need insurance coverage to insure the liability their businesses are confronted with. Different classes of business will experience different liabilities. The question then becomes not whether the business needs its liability insured but what is liability? and how much of a safety net your business needs? Read SBAs article to get those answers in full.

In short it is the financial responsibility that a business carries in the case that someone gets injured at their business or property gets damaged due to employee negligence.

FINDlaw.com

The article in Find Law goes into the detail of what type of occurrences can happen and in different categories.