Hit chance is the chance an attack will do physical damage. Accuracy and Strength both play a part in a players hit chance as well as Equipment that increase a players Accuracy and Strength. Defense decreases your opponents chance to hit you. This applies for your opponent as well. An opponent with higher levels of accuracy and strength will have a higher hit chance and an opponent with higher defense will decrease your chance to hit them.
Every point of Accuracy negates a point of Defense. For a 100% hit rate, your Accuracy needs to be equal to or above your opponents Defense. Increasing your maximum physical damage also slightly increases your chances of hitting.
Magic Damage follows it's own set of rules and ignores hit chance.