Mediation is a process used to resolve all types of disputes before or during litigation. A trained and independent mediator is hired by the parties (or appointed by the Court) to make an intensive and concentrated effort to get the parties to reach a settlement or compromise which resolves the dispute. The mediator cannot force an agreement, but can give each party an independent evaluation of their case and their likelihood of success in Court. The mediator will engage the parties in a series of discussions and negotiations which, hopefully, results in a final agreement. The process is confidential and is usually completed in one day.
The advantage is that it puts resolution of the dispute solely in the hands of the parties, and not a judge or jury which may not have enough time to become familiar with the issues, or the motivations of the parties. Mediation, when successful, will save thousands of dollars in legal fees and court costs, and will end the dispute immediately.
The disadvantages are that successful mediation usually deprives one party of the exhilaration of vindication in Court. A good mediation settlement rarely leaves one party substantially more satisfied than the other–that is the nature of compromise.
For a complete description of the various forms and uses of mediation, see http://en.wikipedia.org/wiki/Mediation.