The Collaborative International Dictionary of English v.0.48:

Arbitration \Ar`bi*tra"tion\, n. [F. arbitration, L. arbitratio,
   fr. arbitrari.]
   The hearing and determination of a cause between parties in
   controversy, by a person or persons chosen by the parties.
   [1913 Webster]

   Note: This may be done by one person; but it is usual to
         choose two or three called arbitrators; or for each
         party to choose one, and these to name a third, who is
         called the umpire. Their determination is called the
         award. --Bouvier
         [1913 Webster]

   Arbitration bond, a bond which obliges one to abide by the
      award of an arbitration.

   Arbitration of Exchange, the operation of converting the
      currency of one country into that of another, or
      determining the rate of exchange between such countries or
      currencies. An arbitrated rate is one determined by such
      arbitration through the medium of one or more intervening
      currencies.
      [1913 Webster]

WordNet (r) 3.0 (2006):

arbitration
    n 1: (law) the hearing and determination of a dispute by an
         impartial referee agreed to by both parties (often used to
         settle disputes between labor and management)
    2: the act of deciding as an arbiter; giving authoritative
       judgment; "they submitted their disagreement to arbitration"
       [syn: arbitration, arbitrament, arbitrement]

Bouvier's Law Dictionary, Revised 6th Ed (1856):

ARBITRATION, practice. A reference and submission of a matter in dispute
concerning property, or of a personal wrong, to the decision of one or more
persons as arbitrators.
     2. They are voluntary or compulsory. The voluntary are, 1. Those made
by mutual consent, in which the parties select arbitrators, and bind
themselves by bond abide by their decision; these are made without any rule
of court. 3 Bl. Com. 16.
     3.-2. Those which are made in a cause depending in court, by a rule
of court, before trial; these are arbitrators at common law, and the award
is enforced by attachment. Kyd on Awards, 21.
     4.-3. Those which are made by virtue of the statute, 9 & l0 Will.
III., c. 15, by which it is agreed to refer a matter in dispute not then in
court, to arbitrators, and agree that the submission be made a rule of
court, which is enforced as if it had been made a rule of court; Kyd on Aw.
22; there are two other voluntary arbitrations which are peculiar to
Pennsylvania.
     5.-4. The first of these is the arbitration under the act of June 16,
1836, which provides that the parties to, any suit may consent to a rule of
court for referring all matters of fact in controversy to referees,
reserving all matters of law for the decision of the court, and the report
of the referees shall have the effect of a special verdict, which is to be
proceeded upon by the court as a special verdict, and either party may have
a writ of error to the judgment entered thereupon
     6.-5. Those by virtue of the act of 1806, which authorizes "any
person or persons desirous of settling any dispute or controversy, by
themselves, their agents or attorneys, to enter into an agreement in
writing, or refer such dispute or controversy to certain persons to be by
them mutually chosen; and it shall be the duty of the referees to make out
an award and deliver it to the party in whose favor it shall be made,
together with the written agreement entered into by the parties; and it
shall be the duty of the prothonotary, on the affidavit of a subscribing
witness to the agreement, that it was duly executed by the parties, to file
the same in his office; and on the agreement being so filed as aforesaid,
he shall enter the award on record, which shall be as available in law as an
award made under a reference issued by the court, or entered on the docket
by the parties."
     7. Compulsory arbitrations are perhaps confined to Pennsylvania. Either
party in a civil suit or action,, or his attorney, may enter at the
prothonotary's office a rule of reference, wherein be shall declare his
determination to have arbitrators chosen, on a day certain to be mentioned
therein, not exceeding thirty days, for the trial of all matters in variance
in the suit between the parties. A copy of this rule is served on the
opposite party. On the day. appointed they meet at the prothonotary's, and
endeavor to agree upon arbitrators; if they cannot, the prothonotary makes
out a list on which are inscribed the names of a number of citizens, and the
parties alternately strike each one of them from the list, beginning with
the plaintiff, until there are but the number agreed upon or fixed by the
prothonotary left, who are to be the arbitrators; a time of meeting is then
agreed upon or appointed by the prothonotary, when the parties cannot
agree, at which time the arbitrators, after being sworn or affirm and
equitably to try all matters in variance submitted to them, proceed to bear
and decide the case; their award is filed in the office of the prothonotary,
and has the effect of a judgment, subject, however, to appeal, which may be
entered at any time within twenty days after the filing of such award. Act
of 16th June, 1836, Pamphl. p. 715.
     8. This is somewhat similar to the arbitrations of the Romans; there
the praetor selected from a list Of citizens made for the purpose, one or
more persons, who were authorized to decide all suits submitted to them, and
which had been brought before him; the authority which the proctor gave them
conferred on them a public character and their judgments were without appeal
Toull. Dr. Civ. Fr. liv. 3, t. 3, ch. 4, n. 820. See generally, Kyd on
Awards; Caldwel on Arbitrations; Bac. Ab. h.t.; 1 Salk. R. 69, 70-75; 2
Saund. R. 133, n 7; 2 Sell. Pr. 241; Doct. Pl. 96; 3 Vin. Ab. 40; 3 Bouv.
Inst. n. 2482.