The simple answer is, prices coming down on goods and services. There are two types of deflation, good and bad.
Good Deflation:
Prices of goods and services are improved due to innovation either in manufacturing or in product delivery (i.e. inventory management).
Bad Deflation:
Prices of products and services are pressured by a lack of demand at current price level and demand can only be spurred by a price reduction. Some people actually feel as though bad deflation is a way of deflating an over inflated economy. When prices are forcefully reduced due to economic pressures, this causes increased unemployment, which perpetuates the situation. Companies must let people go to be able sell their products cheaper. This in return pressures the remaining workforce to pick up the slack without increased wages.
Many people may say that my definition of deflation is not descriptive enough to all the moving pieces (i.e. monetary value), but to me it is a simple way to identify and understand this potently destructive force.
