An issue is an existing problem for the project. According to the PMBOK glossary an issue is a "point or matter in question or in dispute, or a point or matter that is not settled and is under discussion or over which there are opposing views or disagreements." The issues are tracked in an issue log.
Examples of issues include conflicts between stakeholders. For instance, one issue could arise when a procurement timeline will not allow the project to meet its schedule. Another issue could be a need for an approval to do something in a way that is not standard for the organization. An issue could also arise when a sub-contracted group's performance does not meet the desired quality.
An issue is distinguished from a risk. A risk is a potential threat or opportunity. An issue already exists.