When you purchase shares of stock, you buy a piece of ownership in the company you bought it from. The buying and selling of stocks can occur with a stock broker (A license is needed to trade stock) or directly from the company itself. Brokers serve as an intermediary between the investor and the seller.
Short Selling is the selling of a stock that the seller doesn't own. More specifically, a short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered.
Source: http://www.investopedia.com/university/shortselling/shortselling1.asp#axzz1ro82vGnJ
See: http://www.investopedia.com/articles/stocks/08/borrowed-securities.asp#axzz1ro82vGnJ
~ "The Benefits Of Borrowed Security's"
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