Arbitrage is a term used in finance for a 'risk free return'.
It occurs when there is a pricing inefficiency giving people the opportunity to simultaneously trade the same investment at different prices
For example, if you see that the same commodity is trading at $100 on Exchange A and $101 on Exchange B. You would place a sell on Exchange B (and receive $101) and a buy on Exchange A (and pay $100) . The buy and sell cancel each other out, and you are left with $1 which you made risk free.
Theoretically, these pricing inefficiencies correct themselves because the actions of arbitrage traders closes the gap in prices.