Banned isn't a standard user group, so it's one that you have added or have imported from a previous migration.
Users are banned by using the Ban User button on the ACP home page, or visiting ACP > Users > User Discipline > Banned Users (or there are other ways as well).
Any banned user group is purely for styling purposes.
@Martok, thank you. It did become apparent to me when I added a user to my Banned group and then he kept posting - nothing seems to have happened. I did the second thing you mention - went to the list of banned user and clicked the button to manually add this one.
A further question, please - the user I banned shows up for me with strikethroughs in his username, but non-admin users see his username as they did previously. Why the difference, and is there a way to control this behavior?