A betting exchange is a marketplace where people bet against each other rather than against a bookmaker. It matches the bets and takes a commission on winnings, usually 2% to 5%.
Backing is betting that a horse wins. A bookmaker only takes back bets.
On an exchange you can also lay: bet that a horse loses, taking the bookmaker's side. Every matched bet is one person backing and another laying at the same price.
A bookmaker's price has a margin built in. An exchange price does not, so it is the best public estimate of a horse's chance.
Exchanges also price the win and the place as separate markets, so the place part of an each-way bet can be checked against its own market.
When a bookmaker's price is bigger than the exchange lay price, that is an arb.
EWEdge flags each-way bets where this happens as Arb picks. You back them at the bookmaker as each-way no lay bets.
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