An offset mortgage users funds in a savings or current account to offset against the interest on your mortgage.
This allows you more flexibility as you still have the cash there available to you to use from your savings or current account but while it is in your offset mortgage account it reduces your mortgage payments.
The easiest way to explain this is to give you an example:
If you have a mortgage of £120,000 at 3.5% over 25 years you will be paying £350 per month interest.
If you have £20,000 in your offset mortgage account you will be paying £292 per month interest.
You will be saving £58 per month in interest.
Normally your monthly payments stay the same which means that you will be overpaying your mortgage, which in turn also reduces the overall interest you will pay.