The dreaded heel hook in action. Palhares has been banned from the UFC after this fight, for holding the submission too long. It doesn't actually seem that egregious to me in the video -- when the stakes are high, the fighter should not release the hold until instructed by the referee. See also Snap, Crackle, Pop.
Back in the day when grappling and BJJ were still fringe activities, I often had to travel to strange clubs to find training. It was intimidating to visit a new school where I didn't know anyone, even more so to spar with people who could easily injure me. The one submission I was most afraid of was the heel hook. The two serious injuries I sustained in years of training were from a straight armbar (juji gatame) and a heel hook, which sprained the tendons around my knee. The heel hook is much more effective on the street, where the opponent is likely to be wearing shoes and pants (escaping by pulling the leg out is much harder than in MMA), although there are also reasons not to pull guard in a street fight.
Palhares reportedly cried at the weigh-in after a hard cut to 170 lbs. In the past he's fought at 185 and probably walks around at 200 or so.