Vesting is a method of a gradual and/or delayed token distribution. In tokenomics it describes how much and over what period of time token is being distributed.
Usually projects will implement some kind of vesting for the tokens allocated to early investors (VCs, early backers, advisors), as well for the development team. It incentivises investors and teams to stay focused on making project a success over longer periods of time. In contrast without vesting allocations, teams or investors could just dump all of their tokens right after the public sale and walk away from the project (what was prevalent in ICO era of 2017).
Most common vesting schedule for a project nowadays is 2-4 years with a cliff of 6-12 months and it is implemented using smart contracts.
A cliff or vesting with a cliff adds a delay to the initial distribution of a token. It removes some of the sale side pressure in the initial stages of a token launch. Also a cliff is called a cliff because it looks like an actual cliff if a vesting schedule were a mountain lol (see in a second example bellow).
|4 year linear vesting||Project A raises money from investors in exchange for some amount of tokens with a 4 year linear vesting schedule.
Meaning that through the first year investors will be gradually distributed 25% of their token allocation, second year another 25% and so on.
|4 year linear vesting with a 1 year cliff||Project B raises money from investors in exchange for some amount of tokens with a 4 year linear vesting schedule with a 1 year cliff.
Meaning that investors will be able to access 25% of their token allocation only at the end of the first year. From that moment they also will be getting a gradual linear distribution of tokens same as the first example above.