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What do physicists mean when they refer to a quantum field theory being unitary? Does this mean that all the symmetry groups of the theory act via unitary representations? I would appreciate if one could provide some references where the definition of a unitary QFT could be found. Especially in the case where there might not be a special direction singled out as "time".

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No, that's a different story (unitary reps of symmetry groups). It means that all states $|n\rangle$ in the theory have positive norm, i.e. $\langle n|n \rangle > 0$, but the full answer is more involved and should involve a discussion of reflection positivity. – Vibert May 24 '13 at 19:45
...(and also the S-matrix and the Froissart bound, of course). – Vibert May 24 '13 at 20:30
In a quantum theory (quantum mechanics or quantum field theory), unitarity means conservation of probability (or conservation of information), that is, if a state $|\psi>$ evolves in a state $|\psi'>$, you will have $<\psi|\psi> = <\psi'|\psi'>$. This means that the operator which transforms $|\psi>$ into $|\psi'>$ must be unitary. Unitarity is mandatory for the probabilistic coherence of the quantum theory. – Trimok May 27 '13 at 11:01

To expand on @user26374's answer a little, the phrase "A QFT is unitary" comes from the requirement that the $S$-matrix is unitary, i.e. $S S^\dagger = S^\dagger S = 1$ which is equivalent to the statement that sum of probabilities is 1. Unitarity implies several serious constraints on how a QFT can be formulated. For example, unitarity implies the Froissart bound, $\sigma \leq s \log s$ ($\sigma$ is the total cross-section and $s$ is the center of mass energy). It also implies that the propagator for a field must go no faster than $\frac{1}{p^2}$ at large $p^2$.

Unitarity is discussed in Weinberg Vol. 1.

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