OLAP stands for On-Line Analytical Processing. The first attempt to provide a definition to OLAP was by Dr. Codd, who proposed 12 rules for OLAP. Later, it was discovered that this particular white paper was sponsored by one of the OLAP tool vendors, thus causing it to lose objectivity. The OLAP Report has proposed the FASMI test, Fast Analysis of Shared Multidimensional Information. For a more detailed description of both Dr. Codd's rules and the FASMI test, please visit The OLAP Report.
For people on the business side, the key feature out of the above list is "Multidimensional." In other words, the ability to analyze metrics in different dimensions such as time, geography, gender, product, etc. For example, sales for the company are up. What region is most responsible for this increase? Which store in this region is most responsible for the increase? What particular product category or categories contributed the most to the increase? Answering these types of questions in order means that you are performing an OLAP analysis.
Depending on the underlying technology used, OLAP can be broadly divided into two different camps: MOLAP and ROLAP. A discussion of the different OLAP types can be found in the MOLAP, ROLAP, and HOLAP section.