The hotbar is the top row of your inventory, which holds 10 items, (or 5 on iOS/Android, although this can be changed to 10) and is numbered from 0-9 (matching the number row of the keyboard). The hotbar holds items that can be used by left-clicking the mouse. You can change the item you are currently using by left clicking the item, scrolling the mouse wheel up/down or by pressing the corresponding number on a keyboard. The hotbar can also be locked to prevent accidentally changing items (only prevents click-changes, scrolling and number key changes still function as usual). When using the "deposit all" function at a storage item, items in the hotbar will not be removed, and the hotbar items are immune to the general quickstack (pc).
If autopause is off, you don't need to have an item in your hotbar to use it. You can simply select the item and click anywhere outside of the inventory dialogue. If an item is selected when the inventory is closed, the item is dropped as if it were right clicked, and the hotbar automatically switches to the number 9 slot. When a slot is selected it says the name of the item selected.