Charter flights are usually booked part of a travel package. This is in comparison to scheduled flights which are available to book through an airline, depart at regular intervals and are accessible to the general public.
Charter flights are usually arranged by a tour company who charter a plane for a chosen day and route and then sell the seats themselves through a travel agent. This is usually part of an all-inclusive package which covers accommodation and entertainment as well.
However they have recently also become an option for those not booking a package holiday. If you choose to book a charter flight at the last minute you can usually expect highly discounted rates. This contrasts with scheduled flights which generally go up in price as the departure date nears.
The reason for this is the need for all seats on charter flights to be filled to avoid making a loss. Unfortunately this also means that flights are sometimes cancelled at the last minute if they have not been filled. Also, if you cancel your booking yourself, you will not always receive a refund.
Charter flights are not always entirely reliable, but they do provide cheap flight only deals if all works out.