From the Land Pricing page:
The Land Use Fee is a monthly charge for the peak amount of Second Life land held during the previous 30 days in excess of the 512 square meter allowance granted with a Premium Account. The fee is tiered, and discounted as you acquire more land. When purchasing new land, you will be alerted if the new acquisition moves you into a higher tier requiring a greater monthly land use fee.
Note that owners of private islands sometimes describe the monthy fees that they pay to maintain their islands as 'tier'. This is a totally separate scheme, and land tier fees paid to Linden Labs cannot be used to cover this.