After Berlin's incident at the Christmas Market, the other day (somewhat personal, given that I knew the streets involved, although it was never Christmas time when I was there), I've now observed armed police (as well as the regular bunch, being much more visible than usual) deployed to stroll around both the city-centre and the out-of-town shopping centre in pairs, here in the UK.
The connection seems obvious. We don't (out here in the provinces, at least) often see these guys walking round our British streets, and I've never noticed them in the latter locale. These serious-looking guys don't get deployed on a whim.
I wouldn't go so far as to say there's a credible threat, but maybe a credible fear, enough to make those in charge think it's less worrying for people to see them than it is to not see them. (Or, uncharitably, a political decision to make people think the situation is such that this is what they should be thinking.)
They get deployed when an imminent attack is likely. Ergo there is a credible threat. Realistically there is always a credible threat, however in lieu of recent attacks, more security usually gets deployed to cover more corners with countermeasures in the event of accomplices, imitators or individual units enjoying the chaos to attack. The UK tends to stay at substantial, as there is usually a risk of Islamists or Republicans attacking something somewhere at any moment, whilst we're now at severe meaning there is good reason to believe an attack is highly likely. There is only one higher security alert, which is one that means an attack is expected (last used before the 7/7 bombings occurred). The threat is assessed based off of capabilities, terrorist activity and whatever intelligence they have access to that we don't, and from what they're looking at, it's very easy to gain access to a vehicle like a lorry, terrorist activity is high throughout the continent and the timespan of Christmas markets and festivals makes for vulnerable soft targets where mass casualties can occur. Thus the armed police would ensure casualties are minimized in the event of an attack. What is also more severe is how terrorists have changed their tactics from elaborate plans for mass casualties requiring much communication (that can be intercepted) to just having people run around with machetes, guns and trucks, which greatly reduces the response time possible for security forces. Thus by placing security forces at likely targets, police can maximize the chance that their response time will be minutes or better.
I don't think I've seen so many police firearms in one day since the day I happened to be wandering through the back streets of London to avoid a particularly rowdy anti-capitalism march in central London and happened to pass by an obvious staging post for backup patrols of various types (riot, equine, firearms, paramedics... no firefighters though), waiting to see if they were needed. (And they almost certainly weren't, despite how the march later turned out on the news.)
I imagine that the DefCon level is similarly raised all over, this week, across Europe as a whole.
The London Olympics had more, much much more. Chances are this is mostly all for show, as if you have armed police directing road blocks and civilian traffic in an orderly fashion, they will feel safe that they can go to Christmas market without being run over by lorries, thus will have an altogether enjoyable time and help ensure society runs in an ordinary fashion