Flash Loan
A loan borrowed and repaid inside a single blockchain transaction, which needs no collateral because the whole transaction reverts if repayment fails.
Blockchain transactions are atomic: every step succeeds or the entire transaction is undone as though it never happened. A flash loan uses that property, lending any amount available in a pool on the condition that the borrowed sum plus a fee is returned before the transaction ends. Legitimate uses include arbitrage between venues, swapping the collateral behind an existing loan without repaying it in cash first, refinancing a position between protocols, and funding liquidations. The same tool has been used in exploits, where an attacker borrows enough to distort a thinly traded price feed within one transaction and then trades against a protocol that trusts that feed.
In practice
A trader can borrow, execute a series of swaps that close a price gap between two pools, repay the loan with its fee, and keep the difference, all within one transaction.
The common misunderstanding
Flash loans do not create free capital; unless the loan plus fee is repaid before the transaction ends, everything reverts and only the network fee is lost.