Favored Enemy is one of those cards players keep asking about. Here is, in plain words, what its official text says, the rulings published by Wizards of the Coast, and the combos players actually run.

Official card text

As this enchantment enters, note the most prevalent creature type in an opponent's library. When this enchantment enters, target creature you control fights up to one target creature you don't control. Whenever a creature an opponent controls of the noted type dies, put a +1/+1 counter on target creature you control.