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"Wizard hats are often receptacles for easily portable enchantments. They can be quite stylish, too."— Game Guide(src)
Instead of heavy metal helmets that obscure vision and dampen their magical abilities, many Wizards choose to wear hats of enchanted cloth. These hats are holding powerful spells in themselves, often augmenting the Wizard's power. Lots of Wizard Hats look like stereotypical witch hats, turbans or exotic headdresses of the East.
In game, Wizard Hats are treated as normal helms, but in addition to stats typical to helms, they can also roll increased damage for certain Wizard skills, maximum Arcane Power and Arcane Power on critical hits. Wizard Hats can be transmogrified into normal helms, but only Wizards may do the other way around.
Interestingly, neither of the Wizard sets use Wizard Hats.