Handicap is used to make the game even for players with different skill levels. Currently, handicap affects only damage. A handicap value of 1 means that there is no handicap. Handicap values more than 1 means the game is harder. For example, if your handicap is 2, you will deal 50% damage to opponents while they will deal 200% damage to you. Handicap values less than 1 do the opposite.
There are 2 types of handicap: voluntary and forced. Voluntary handicap can be set by client via cl_handicap variable.
cl_handicap 1sendcvar cl_handicap 1
For obvious reasons, you can't set it to be less than 1.
Forced handicap can be set by the server and can be less than 1. For example, by dynamic handicap mutator.