Hi Jess,
Drop-shipping is the sale of a product that you don't own or stock in inventory.
Say you have a website, but want to offer more products than you actually have in stock. You can make an arrangement with another company to feature their products on your site. When one of their products is purchased on your site, you charge your customer the full price, you notify your supplier-company, and they ship, or "drop ship" the product directly to your customer. You never see it, or own it.
You collect the sales price from you customer, and pay the supplier-company the agreed cost of the product plus shipping.
Most of the products on Amazon.com are drop ship items - Amazon doesn't own them, but sells them.
This is a great way to increase your online product offering, without incurring the cost of actually owning the inventory.
Ray