A short sale is when an owner tries to sell his house for less than it's worth. In those cases, the lender's approval is required. Example: Someone bought a house back in 2006 for $300,000. Today it's worth $100,000. The owner puts it on the market as a short sale for $100,000. You offer $100,000. The owner agrees. Then the signed contract goes to the owner's lender who either disapproves or approves the deal. Why is the owner's lender involved? Because that's who will lose money--the difference between the purchase price and what's owed. The lender has to say: "I am willing to lose $200,000 on this transaction."
Sometimes short sales result in multiple bid situations. In the example above, one person might offer $95,000. Another might offer $100,000. A third might offer $105,000. That third offer is the highest one. However, the listing agent wants to send the strongest offer (which isn't always the highest offer) to the lender.
Note: Not all short sales succeed. In fact, many fail. Often, the bank rejects the offer. Other times, it takes so long (3-6 months or more is typical . . . . 12 months isn't rare) that the buyers back out.
So, that's what a short sale is. I can't believe, though, that your agent allowed you to pursue a short sale without you knowing what it was and what's involved.
Hope that helps.