Hentai (変態 or へんたい) refers to social abnormalities. Typically, this is a direct reference to sexual perversion, and so is usually translated pervert.
In anime circles, it normally refers to Anime or Manga that are erotic in nature. Such material is labelled 18+ or adult in the US. (In Europe, the age is often lower, and in some countries, provincies, or states, the minimum age may be as high as 21.) Most such material is often censored because Japanese law forbids the appearance of genetalia and the anus in viewable material. The vagueness and non-specific laws have led to very creative self-censorship (either to ease viewing or to allow de-censoring). Uncensored material is normally still commercially available. Hentai considered rather discriminative toward woman, while most of Hentai exposes woman, it rarely exposes the man, hence the association of eroticism and erotic in Hentai is rather contradictory.
Nowadays, the term ero tends to be used in Japan for erotic things, and the word hentai is going out of fashion.
A closely related word is ecchi, (エッチ) which is usually in reference to a lesser degree of eroticism than hentai.