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A character is Gimped if that character is wrongly equipped to face the task at hand. This has to do with both character settings (attributes and skills) as well as equipment (weapons and armor). For example, an elementalist who shows up for a GvG battle with Air skills but has his attributes set to Fire, is gimped.

Same goes with equipment, if you are supposed to have a special set of armor for a certain task at hand and forget that armor set in your storage or if you accidentally choose a weapon with the wrong attribute requirements and end up without causing any damage, all of this causes serious handicaps.