Party Place -

There are three distances in a party: front, middle, and back.

Front - 
  Opponents' melee attacks hit party members in the front.
  If noone is left in the front, the party shifts forward.
  Distance necessary for melee with all weapons.
  Melee skills - only work from the front. 
  Ranged combat impossible here. You use the ranged weapon 
as a very poor melee weapon, often bludgeoning.
  Offensive spells take a small penalty.

Middle -
  Melee with Polearms and Whips
  Ranged skills work at this distance.
  Melee combat in maneuver defense mode.
  Offensive spells receive a small bonus.

Back -
  Ranged skills work at this distance.
  Damage reflection from you hits those in the front.
  Ranged combat has a to hit penalty, due to distance.

Misc -
  Some skills, spells or race powers may require specific
distances.
  Ex: Assist skill only works on someone within 1 distance
of the hero. That is, someone in the middle can assist
someone in the front or back, but someone in the back 
can only assist someone in the middle.
  Ex: Mass shield gives a 10% resistance to all damage done 
to those in the middle and 20% resistance to all damage
done to those in the back