If you drive, you're well aware of the day-to-day swings in the price of gasoline. If you need gas on Tuesday, you pay Tuesday's retail price. This is the "spot" market. Each day, the gas station may raise or lower its price, and customers pay the posted rate.
Now imagine you're a next-day shipping company with a fleet of trucks. You've already committed to delivering packages, and you can't afford to take a risk that the price of gasoline will suddenly spike. You might want to make a deal with the gas station to prepay for all of the gas you'll need for three months at today's prices.
In this kind of arrangement, known as a forward contract, both sides get some measure of protection: The gas station owner is protected from a decrease in gas prices and locks in a big sale, and the shipping company is protected from an increase. A more basic example is a two-year magazine subscription: You lock in today's price, so even if the subscription goes up in price, you don't pay any extra.
