Lord of the Rings Online explains the Allegiance system in Mordor

We’re probably not going to blow your mind by saying this, but here it is anyway: Mordor in Lord of the Rings Online is not a friendly place. You’re shocked, obviously. But the point is that you’ll need to have some allies to deal with the problems of that land, and those allies need to know you’re their ally. Hence, the upcoming Allegiances system, a chance for players to improve reputation and standing with one of four factions for cosmetic rewards and unique storylines.

It’s important to note that the four factions (the Hobbits of the Company, Durin’s Folk, the Court of Lothlorien, and the Kingdom of Gondor) will not affect your access to endgame gear, even though the Allegiance system will be tied into the endgame. But your choice is mostly between the four stories you wish to follow and which cosmetic gear you want to access first. Still, much like Merry and Pippin’s oaths of service (which formed the initial concept for this system), it’s going to be important from a narrative standpoint to consider whom your character will bend a knee for.