Escrow is a financial arrangement where a third party holds and manages funds or assets on behalf of two parties involved in a transaction. This ensures that the buyer and seller meet their obligations before the transaction is completed. For example, in a real estate deal, the buyer deposits money into an escrow account, which is only released to the seller once all conditions are satisfied. The escrow process helps protect both parties by providing security and trust. It is commonly used in various transactions, including real estate, online sales, and mergers and acquisitions. By using escrow, parties can minimize risks and ensure a smoother transaction.