Short Sale:	In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank's loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.
Foreclosure	The legal and professional proceeding in which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption.
Judgment	A decree by a court of law that one person, a debtor, is indebted to another, a creditor, in a specified amount. The court may place a lien against the debtor's real property as collateral for payment of the judgment to the creditor.
Deed in Lieu	is a deed instrument in which a mortgagor (i.e. the borrower ) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings. The principal advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan.  Another benefit to the borrower is that it hurts their credit less than a foreclosure does. Advantages to a lender include a reduction in the time and cost of a repossession, and additional advantages if the borrower subsequently files for bankruptcy. The settlement agreement must have total consideration that is at least equal to the fair market value of the property being conveyed. Sometimes, the lender will not proceed with a deed in lieu of foreclosure if the outstanding indebtedness of the borrower exceeds the current fair market value of the property.
Lien	A form of security interest granted over an item of property to secure the payment of a debt.  Generally a lien refers to a wide range of encumbrances and would include other forms of mortgage or charge.
Qualifying Hardship:	Any hardship that common sense would indicate a seller is likely to default on the loan and the property would be sold at trustee sale in the future.  These include the loan payments adjusting up, reduction in household income, job loss, job transfer out of the area, unforseen expenses, illness or death of a party to the loan and many other reasons.  Basically, if you can show your total expenses exceed your net income than you qualify.
Assets:	You do not need to have zero assets to qualify for a short sale! I have regularly had short sales approved when the seller has assets including retirement accounts, savings and other real estate holdings.

Definitions courtesy of Wikipedia.com