According to About.com Sequestration is a term used to describe the practice of using mandatory spending cuts in the federal budget if the cost of running the government exceeds either an arbitrary amount or the the gross revenue it brings during the fiscal year.

Or simple terms, sequestration is the employment of automatic, across-the-board spending cuts in the face of annual budget deficits.  You can read more about the process of sequestration, its history and how it will affect us at About.com.

The literal definition of the word Sequester from thefreedictionary.com

se·ques·ter  (s-kwstr)

v. se·ques·tered, se·ques·ter·ing, se·ques·ters

v.tr.

1. To cause to withdraw into seclusion.
2. To remove or set apart; segregate. See Synonyms at isolate.

3. Law

a. To take temporary possession of (property) as security against legal claims.
b. To requisition and confiscate (enemy property).