A method of dispute resolution involving one or more neutral third parties who are usually agreed to by the disputing parties and whose decision is binding.

In Plain English:

Often a case will be resolved without going to trial. Sometimes both the plaintiff and defendant might agree to resolve the case through arbitration. In that case, the two parties will work together to select a neutral person to be the arbitrator, who will act as a sort of “judge.” Both sides will present their side of the case to the arbitrator, and the arbitrator will make a decision which is binding.