An escrow is part of your sale proceeds held by an independent third party rather than paid to you at completion, kept back to cover indemnity claims or other agreed contingencies.
Technically, it is an arrangement where a portion of the purchase price is deposited with an independent escrow agent, usually a law firm or specialist provider, for a defined period, released according to the terms of a separate escrow agreement.
The buyer wants a larger escrow held for longer, so there is real money sitting behind any warranty or indemnity claim they might bring. The seller wants it smaller and shorter, because escrowed funds are money you have earned but cannot yet spend.
Escrow is generally better for a seller than a holdback, because release is governed by the escrow agreement and the agent’s instructions rather than by the buyer’s own discretion. The buyer cannot simply decide not to release it.
What you as a seller should push back on: an escrow amount that duplicates cover you already have through W&I insurance, a release period that runs longer than the survival period for the warranties it secures, and a release mechanism that requires the buyer’s active consent rather than releasing automatically once the period ends.