An increase in the number of shares of a company's stock, causing the value of each share to decrease.
The number of shares increases when the company offers new stock to the public to raise cash; or when employees exercise their stock options; or when holders of convertible bonds convert their bonds to stock.
Companies that can afford to will frequently buy back issues of stock to fight dilution.
(Note that dilution is different from a stock split.
If you're an investor and your stock splits, the number of shares increases but you receive additional shares, so the value of your investment remains constant.
Dilution means that current investors do not receive more shares; so you'll own a smaller percentage of the company's stock, and your investment is worth less).
Information about the company's issuing and buying back stock is shown in the "financing" section of the cash flow statement.