Arbitration is defined, by Black's Law Dictionary, as a dispute-resolution process in which the disputing parties choose one or more neutral third parties to make a final and binding decision resolving the dispute. The parties to the dispute may choose a third party directly by mutual agreement, or indirectly, such as by agreeing to have an arbitration organization select the third party.
Under the Federal Arbitration Act , decisions reached through arbitration are binding just like a court case is and pursuing a claim through arbitration precludes you from also raising it in the traditional court system. Arbitration is used because it is often much less expensive than litigation due to its less stringent procedural requirements.
Of the potential alternative dispute resolution methods available, arbitration is the most similar to taking your case to court. For example, while arbitrators are not subject to the Federal Rules of Evidence , they nonetheless allow the parties in dispute to enter evidence when they deem it fair. Furthermore, parties undergoing arbitration typically agree to conduct some limited form of discovery.
Cornell Legal Information Institute provides more context to arbitration.
A Client's Guide to Mediation and Arbitration: the strategy for winning by 
American Arbitration: principles and practice by 
Arbitration Law in a Nutshell by 
Handbook on Arbitration Practice, 2nd Ed by 
Principles of Alternative Dispute Resolution by 
The Arbitration Conversation: Insights and Wisdom from Experts in the Field by 
Commercial Arbitration by 
Domke on Commercial Arbitration by The Law and Practice of Arbitration - 7th Edition by 
How Arbitration Works by 
