Learn about cryptographic escrow!  Actual "How It Works" text from my escrow utility available at https://casascius.com/btcaddress-alpha.zip


How Three-Party Cryptographic Escrow Works

Escrow allows two people to transact in Bitcoin while leaving their funds visible to everybody and accessible to nobody until somebody releases them.  It allows the payer or the payee to release funds to one another, and also lets a third person decide for them if the two can't agree.  The third person never has access to take the funds, and is only needed to release the funds if the original two can't agree who gets them.  Whoever gets a copy of all three "invitations" gets access to the funds.

Let's pretend that Alice wants to pay Bob, and they agree to use Eddie as their escrow agent.

First, Eddie creates a pair of Escrow Invitation codes.  This is a matched pair of codes representing a single invitation.  These codes can be used by someone else in a future transaction to give Eddie the authority to act as the escrow agent.  He gives one code to Alice and the other to Bob, and keeps a copy for himself.

Second, Bob creates a Payment Invitation and gives it only to Alice, but keeps a copy for himself.  When Alice and Bob use the escrow tool to combine their individual Escrow Invitation codes with the Payment Invitation, they'll get the same Bitcoin address.  Alice and Bob must agree they have generated the same address.

Third, Alice sends Bitcoins to that address.  Now, nobody can get them until someone releases them.

Alice can release the Bitcoins to Bob by giving a copy of her Escrow Invitation code to Bob (so that he now has both halves, as well as his Payment Invitation).  He'll use the "Collect Your Funds" tab to enter all three, and will receive the private key needed to claim the funds.  The private key can be imported into a Bitcoin client or web wallet.

Bob can give a refund to Alice by giving her a copy of his Escrow Invitation code.

Eddie can also force the payment to be awarded to Alice or Bob by giving them both Escrow Invitation codes.  Eddie can't claim the payment himself because he would also need the Payment Invitation, which he doesn't have.