Settlement is the process of correcting a negative balance.
Example: A trader completes a trade and Bitfinex charges a trading fee of 0.1 BTC, but the trader only has US dollars in his wallet and no BTC. Bitfinex will then settle the charge by converting the necessary USD available in the trader’s account into BTC. To make this conversion, the rate used is the last ask price (if Bitfinex settles a negative BTC balance) or bid price (if Bitfinex settles a negative USD balance). This debit is displayed in your settled balance and a credit to the other balance.