Mediation is the attempt to settle a legal dispute through active participation of a third party (mediator) who works to find points of agreement and encourage those in conflict voluntarily agree on a fair result.
Mediation differs from arbitration, in which the third party (arbitrator) acts much like a judge in an out-of-court, less formal setting but does not actively participate in the discussion. Mediation has become very common to resolve domestic relations disputes (divorce, child custody, parenting time) and is often ordered by the judge in such cases. Mediation also has become more frequently utilized in contract and civil cases. Mediators do charge for their time, but the financial cost may be less than fighting the matter out in court and may achieve early settlement and the peace of mind that comes with settlement. However, mediation does not always result in a settlement.
Statements made in mediation are confidential and normally may not be repeated in court. Mediation is voluntary in the sense that parties are able to break off discussions at any point. Mediation can occur with the parties in one room [with or without their lawyers present] or in separate rooms with the mediator going back and forth carrying messages and positions.
In arbitration, authority is given to a third party to make a final decision if the parties themselves cannot agree. Most aspects of family law cases can be arbitrated outside of court, if both parties agree, with or without lawyers involved.