Definition of fear equity
Fear equity is a phenomenon that is especially applicable in tournaments. Imagine you are at the final table of a tournament. You have 12 big blinds, but 2 players have less big blinds than you. And you're sitting to the left of the chip leader who is giving you a hard time in the blinds. If he abuses his stack to steal your blinds and you are too conservative (since you want to let the two smallest stacks go before you), fear equity occurs (the chip leader takes advantage of your fear). The chipleader uses his stack to intimidate the other players.
The bigger the tournament, the bigger the fear equity
If you're at the final table of your life at the World Series of Poker, you know that the fear equity (the extra equity the chip leader will have) will be even more intense. The bigger the tournament, the more cautious players will be when playing against the chip leader. Fear equity won't be huge in a $1 tournament, but the bigger the tournament, the more you can abuse a big stack, especially when playing against small stacks.