To drop (verb) in Guild Wars means to drop treasure. When monsters are slain in the game, they will drop gold and items next to their corpses. This is symbolic of players rummaging through the corpse of a dead foe. It is because these items literally drop next to the corpse that most players will say, for example, "That monster dropped a staff."
A drop (noun) is an item of treasure dropped from a dead monster. The slang expressions "This area has good drops!" and "I got lousy drops today!" are referring to the quality of items that players get after killing monsters.