David I. Karp blogs about mediation and other things here: http://karpmediation.wordpress.com .
The following is a description based on that of the Dispute Resolution Program of Los Angeles County:
Mediation is a flexible, informal and confidential process. In mediation, a neutral (the mediator) facilitates communication and negotiations to assist disputing parties in reaching a mutually acceptable resolution. Unlike a Judge, a jury, or an arbitrator, a mediator does not decide the outcome of the dispute, but helps the parties to do so.
Mediators use a variety of techniques to help the parties examine their underlying interests, needs and priorities and explore more creative resolutions, including options not available through trial or arbitration. Some of the common approaches include: helping the parties effectively express their perspective; clarifying the parties' issues, interests and needs; helping the parties identify options for resolution; acting as an intermediary in negotiations between the parties.
The parties actually involved in the dispute attend and participate more actively than in other dispute resolution processes. There are many different mediation styles, and most involve a joint meeting of all participants. Many mediators also meet with the individual parties and their attorneys in private sessions. In these meetings, the participants discuss the problems, issues and potential solutions, rather than presenting evidence and arguments to a third-party decision maker. With limited exceptions, the discussions and any documents prepared in the mediation are confidential and cannot be admitted as evidence in non-criminal proceedings.
If the parties reach an agreement in mediation, they may specify that it will be enforceable by the Court. Because the resolution is decided by the parties rather than forced upon them, settlements achieved in mediation are more likely to be carried out and often improve relationships between the parties.
Two excellent descriptions of mediation are available below, one from the Appellate Mediation Program of the California Court of Appeal, Second Appellate District, the other from colleagues Daniel Ben-Zvi and Caroline Vincent.