Magnitude is the power of a spell. If it's a damage spell it will do more damage, a heal do more healing and a buff give more stats or protection with higher Magnitude.
Magnitude is affected by the level staffs, skill in the spell you're using, skill in Intensify Spells in the school you're using and Archmage. The higher staff level and skill level generally increases the Magnitude of the spell. Encumbrace on the other hand reduces the Magnitude of your spells. The higher your Encumbrance the less magnitude you will have, it will also affect the time it takes for the spell to charge.