Unrest represents people being unhappy with the ruler of the province. This can be the result of many different unhappiness-generating events: a difference between the nation which controls the province and the one that exerts dominion over it will do it, since the people worship one god but are ruled by another. Blood hunting will definitely do it – imagine how happy you would be if someone came through your village and rounded up a bunch of young virgins for a blood sacrifice. Enemy spies and bards can do it because that is their job. Random events such as ill omens can cause unrest to increase. You should consider whether an ill omen would make you uneasy as well.
Unrest reduces the amount of income and resources a province generates. A province with unrest of 100 or greater will not permit the recruitment of new units. Thus, you can shut down an opponent’s production by destabilizing his or her provinces.