Libation is a type of offering in which an edible liquid is poured straight onto the ground. Traditional libation liquids include wine, honey, water, milk, and (often olive) oil. As Walter Burkert says in Greek Religion (p. 72):
What is important is not that the libation reaches its destination, but that the offerer surrenders himself to a higher will in the act of serene wastefulness.
He goes on to say:
What distinguishes the outpouring from other gifts of food is its irretrievability: what is spilled cannot be brought back. The libation is therefore the purest and highest form of renunciation.
Two types of libation are noted, the sponde and the choe. Of the two, sponde is the one most commonly intended when we use the general term libation. According to Burkert, the word sponde was generally also the only Greek word for the laying down of arms in truce.
In addition to differences in vessel and pouring technique, the two are generally different in intent:
From a practical standpoint, libations are an outstanding facet of Hellenismos. They require no special tools, but merely a sip from a cup of beverage to be consumed. And they may be offered without great expense or memorization of elaborate rituals.
Indoor libations may be poured into a clean dish and taken outside to be poured onto the ground at an appropriate time (such as after a ritual or devotion is complete). It is also possible to set aside a pot of earth, such as a potted plant, for indoor libations. If a potted plant is used, though, one should be mindful of the potential effects of pouring liquids other than water into the soil. For most other libation liquids, I suggest outdoor libations or the use of a libation dish.
Greek Religion, Walter Burkert, English translation copyright 1985 by Basil Blackwater Publisher and Harvard University Press, p. 72.
Religion in the Ancient Greek City, Louise Bruit Zaidman and Pauline Schmitt Pantel, Translated by Paul Cartledge, English translation copyright Cambridge University Press 1992, p. 40.