Perhaps the best way to explain arbitration is to reference television shows like the People's Court and Judge Judy with one key difference - the cameras are off.
The process used in these shows is court-like, but not quite court. A binding decision is rendered by a third party after considering submissions, weighing evidence and applying the law.
The advantages of arbitration over court are...
Choice of adjudicator.
The parties to the conflict are able to select their own judge. This can offer comfort in the decision that will be imposed and avoid the gamble at play when an adjudicator is assigned.
For example, with arbitration you can select an arbitrator who you are comfortable with and who may understand the nature of your conflict.
Faster, more flexible process.
The court system takes a very long time to go through and is quite structured. It can be intimidating and/or difficult to participate.
Arbitration processes can be offered more comfortably and much more quickly. Consider this service allowing you to participate 24 hours a day, 7 days a week from anywhere in the world!
Court decisions are public. Win or lose - not everyone likes to have a public record of their outcome.
Arbitrations let's your business stay your business.