Arbitration is sometimes used as a less formal alternative to trial. A neutral person, called an "arbitrator," hears the evidence and arguments of the parties and then makes a written decision. Private arbitrators are allowed to charge for their time.
The parties can agree that the arbitration be binding or non-binding. In a binding arbitration, the parties waive their right to a trial and agree to accept the arbitrator's decision as final. It is enforceable and completely resolves the case without the opportunity to appeal.
In a non-binding arbitration, the parties are free to request a trial if they do not accept the arbitrator's decision. See California Code of Civil Procedure Section 1141.10-1141.31.
Typically, arbitration is best suited for cases where the parties want another person to decide the outcome of the dispute but want to avoid the formality, time, and expense of a trial before a Judge or Judicial Officer.
Arbitration may not be appropriate if the parties want to retain control over how the dispute is resolved.