Escrow ensures that funds are only passed on to their intended recipient at the right time – and so no one can cut and run with the money before a sale has been completed.
When a buyer decides they want to purchase an item you have listed, they will send the price in Ether to a designated escrow account. At this point, the sale is considered ‘Pending’. The seller will receive a notification that the transfer is awaiting their approval (visible under ‘My items’). The seller can choose to accept the purchase or refuse it (for example, because the buyer is in a country they have stated they will not send items to).
If the seller accepts, they then send the product or item to the buyer. Once received, the buyer decides whether or not they are satisfied with it. If they indicate they are happy, the ETH in the escrow account is transferred to the seller and the status of the listing is updated to ‘Sold’. If the buyer is not satisfied, they can start the arbitration process. The funds locked in escrow are either returned to the buyer or transferred on to the seller, depending on the outcome of arbitration.