Return of capital appears in closed-end-fund distributions, some ETFs, MLPs, and companies paying out of paid-in capital. It is not automatically bad, since it can reflect depreciation exceeding taxable income, but destructive ROC is a fund handing back your own money to advertise a high yield.
Tax treatment is the key difference. ROC is not taxed on receipt; it lowers your cost-basis, so the tax arrives later as a larger capital gain. Once basis reaches zero, further ROC is taxed as a gain immediately.
Example: you buy at $20 and receive $1.50 of distributions, of which $0.90 is return of capital. Your basis falls to $19.10. Selling at $22 produces a $2.90 gain instead of $2.00.
Related: dividend-yield