Sometimes they are successful, sometimes they are a step that nevertheless leads to a trial. Mediation is the less formal process in which the two parties meet with a mediator who tries to help the parties understand each other's claims and the ways in which those claims might be settled to the satisfaction of both parties. The mediator facilitates but does not dictate. The mediator has no legal power other than being a neutral third party. Some Better Business Bureaus offer assistance.
Arbitration is the more formal process.
It is more like a court trial. Witnesses may testify. The parties are adversaries. The arbitrator issues a decision after hearing the parties and witnesses. Arbitration may be non-binding, in which case a dissatisfied party may take a case onward to a court.