A soldier or alien with a remaining action can enter Overwatch (default hotkey Y). This ends the soldier's turn, but allows them to shoot at the first enemy that enters their overwatch range during the enemy turn, albeit at a small penalty(aim penalty/cannot crit).
Some class abilities alter or improve various aspects and properties of Overwatch. These include:
Rapid Reaction (Heavy) Squad Sight (Sniper) Opportunist (Sniper) Covering Fire (Support) Sentinel (Support)