Lay betting in horse racing is essentially a bet that a certain outcome won’t occur.
Say you have a strong opinion that the 6-5 favorite in a race is past his prime and is being overbet. You could lay a bet that the horse won’t win and essentially play the role of the bookmaker. If the horse does win, you pay. If he loses, you collect.
In lay betting practiced overseas, your liability isn’t limited as it is when you bet on a horse. Say the 6-5 shot begins to drift up in the odds as many in the crowd come to the same conclusion as you. By the time the gates open, the horse is now 3-1. If he wins, you are suddenly responsible for paying three times the amount of your original stake.
Lay betting is not widely available in the U.S, but it can be worth shopping around for depending on your risk tolerance.