Likelihood of Confusion (or Confusing Similarity) is the legal standard that determines whether or not trademark infringement has occurred. The likelihood of confusion test is also one of several examinations conducted by the U.S. Patent and Trademark Office in determining whether to approve an applicant’s trademark application.
The specific standard itself is defined by a vast body of law and varies jurisdiction by jurisdiction. The essential ingredient for the likelihood of confusion test is (obvious from the terminology) that consumers encountering one trademark are likely to be confused with a different trademark. This is not to say the consumer feels puzzled or befuddled or the like. Usually the consumer referenced in this body of law is a hypothetical consumer who would be completely unaware that two different companies are using the similar/identical mark. What's more, the hypothetical purchaser is not expected to make detailed, side-by-side comparisons, or to have perfect recall.
Thus, trademark confusion means the incorrect assumption on the part of a hypothetical consumer that the two trademarks belong to the same source. And with likelihood being incorporated into this standard, a court or the Trademark Office must merely decide that the propensity for confusion is strong enough to warrant elimination of the newcomer's use of the mark. Thus many trademark infringement lawsuits proceed without a shred of evidence of any actual confusion. Of course, evidence of actual confusion would be very influential to the outcome.
It is worth noting here that even if there is no likelihood of confusion, i.e. no trademark infringement, you may still be liable for using another company's trademark if you are blurring or tarnishing their mark under the state and/or federal dilution laws.