Definition:
"The value that comes from the possibility that other players will fold when you make a bet.

For example: It is often better to make a bet than call a bet because betting has folding equity, whereas calling does not."

Example:
Suppose you are a 2:1 dog in a hand (~33%). If you feel your opponent is weak (or thinks you are stronger than you really are), you may estimate there is a 25% chance he will fold to your bet, you are now a favorite if you bet.

This is a lame example, but you should get the idea...

SP