Mediationis a non-adversarial process where a neutral third party (mediator) helps resolve a dispute. The mediator does not have the power to impose a decision on the parties. If a satisfactory resolution cannot be reached, then the parties may have to use an alternate method of dispute resolution, or possibly a lawsuit.
Arbitrationis a method of alternative dispute resolution in which the disputing parties agree to abide by the decision of an impartial arbitrator. The parties work together to select an arbitrator. When parties submit to arbitration, the decision of the arbitrator is final and binding.