Good definition from Ruveyn. I'll add that it's not a matter of imagination, but rather an inability to figure out--analytically or intuitively--what someone else is thinking or feeling.
NTs can do this naturally and easily, sometimes with just a glance at a person's face they can read that person's emotional state. A few seconds with that person and they are sympathizing and empathizing, communicating nonverbally and able to understand what is likely going on inside each other.
I've always found this amazing, since I can't do it. Decades of practice has me at approximately the level of a preteen, according to my neurologists. But I have to concentrate, pay attention consciously, and think about what is going on in the other person. This is too much work for me, so I just get along without knowing. There are many other things I find more interesting anyway.