Carbon offset is a marketable unit that represents the reduction of one metric ton of carbon dioxide or the equivalent amount of another greenhouse gas. Carbon offsets permit emitters to not actually reduce their pollution, but to meet regulatory caps on emissions by paying another entity for its reduction of greenhouse gases. However, it is difficult to track the validity of the application of carbon offsets. They may not be used appropriately, or they may go to projects that would have been completed regardless of the funding received by the sale of the carbon offsets, since they were economically efficient.
http://www.businessweek.com/magazine/content/07_13/b4027057.htm