Reversing a transaction means that the institution that performed a transaction debits the recipient and credits the sender for the amount of the transaction. A 'chargeback' is a specific case where funds are returned to a consumer by an issuing bank, reversing a credit card or bank account transfer. Generally the specific term 'chargeback' is used to indicate that it's in accord with specific Federal laws that give the consumers additional rights beyond what they'd normally have and prohibiting the financial institution from acting as a mere intermediary by making them responsible to the consumer for merchant fraud.

In this case, Dwolla charged back TradeHill. They had better be prepared to defend that action in arbitration. If they cannot show some fraud on TradeHill's part (or unjust enrichment, or something like that), or some law that exempts them from that requirement, they are fully liable. You can't reverse a transaction to Jack because you were defrauded by Jill.

If you promise to buy a video card from me for $200 and I buy the video card from NewEgg for $195, then give it to you and you don't pay me the $200, I have no right to charge back NewEgg. If I want to charge back my transaction with NewEgg, I have to show some fraud between NewEgg and me. Reserving the right to charge back, as Dwolla's ToU now says, still doesn't permit them to charge back without a sufficient legal justification.

As far as TradeHill is concerned, Dwolla sent them some money and then reversed that transaction. Dwolla initiated that reversal and they have to defend it. "A third party reneged on us" is not a reason to reverse a payment.