The Seller becomes the bank, basically. Instead of the bank holding the note on the property, the Seller holds the note and the buyer makes payments to the Seller instead of the bank. The Seller still has the property as collateral for the loan if the buyer defaults. The differences may be the amount of downpayment the Seller may want, the interest rate the Seller charges, amortization period, term of the loan, etc. In most cases there is a trade-off between the interest rate charged by the Seller and the less stringent requirements as opposed to the bank: you may pay a little more interest to the Seller, but you may have a lower downpayment and/or less red tape.
Jun 2, 2009