Mediation is a proceeding which is often conducted by private companies but is sometimes also conducted by the courts. In most cases the parties, plaintiff(s) and defendant(s), are separated from each other but their attorney(s) stay with them.
The mediator, a retired judge or experienced attorney, will then go between the parties remitting offers and counter offers to settle the case. They will usually also lend their own opinion on the case and can try to encourage one side or the other to agree to settle. At the time of mediation, the mediator will have read briefs provided by all parties and looked at the supporting documents which the sides have provided. This can allow them a unique position to analyze the case and lend their own insight into it.
Since the cost, both monetarily and in time, of mediation is usually a fraction of trial it has become very popular lately. Many courts have even launched their own mediation programs which are usually cheaper than private mediation and suitable for lower valued cases.
Mediation is voluntary, so as a plaintiff it is usually a good sign if it happens in your case since it means the defense is willing to offer something. On the other hand, private mediation can be costly and it may feel like a waste of time and money if a settlement isn’t reached.