Cats will hiss (it is generally thought) for one of two reasons, either they feel threatened or they are feeling aggressive or it may be a combination of the two.
Often hissing will simply be a way of telling another cat or human etc that the cat is present and is not going to be pushed around. It will often hiss to just register its status and thus try to deter any further activity or aggression from the human or cat to whom the hiss has been directed.

If a cat does hiss at you it is important to avert your gaze from it. If you continue to stare or look at it then it will interpret this as a sign of aggression and continue to hiss and this may escalate into a fully fledged 'cat attack'. By looking away you are acknowledging that it has signalled either fear or anger and you are sending it a message that you do not mean any aggression towards it, so hopefully it should stop hissing.

 According to animal behaviourist Desmond Morris, a cat’s hiss is protective mimicry of the one thing of which all species instinctively fear snakes. The cats hisses and lashes its tail to appear like a venomous snake.
When confronted with a hissing snake, predators often pause long enough to let the snake escape. If a cornered cat can elicits the same response, it increases its chances of survival.
Cats also spit, another way in which threatened snakes react. In addition, Morris believes the flattened ears and gaping jaw of a hissing cat make it s head look serpentine. Tail thrashing imitates a snake working itself up to strike or flee.
The original prototype of domestic cats had striped, tabby colouration. A sleeping tabby, curled up tightly, bears a strong resemblance to a coiled snake. A flying predator such as an eagle might think the cat was a snake and thus not attack.