A short sale is when the bank agrees to accept less than what the homeowner currently owes on a property. For a bank to accept less than the full amount owed, the homeowner must prove some sort of financial hardship, i.e., loss of job, illness, reduced income, divorce, etc. While the homeowner still lists and sells the home, it is ultimately up to the bank to accept, deny or counter the final sales price and terms.
For more detailed information on short sales, I would suggest contacting an agent in your area who is familiar with the process.
Best of luck to you,