Active Time Battle (ATB) is a battle format heavily associated with Square Enix's Final Fantasy franchise. This battle system was initially built as an alternative to the traditional turn-based system used many times prior to its development.
With ATB, characters don't always act on a turn ratio of 1:1, but instead act as determined by Charge Time. An ATB gauge fills up over time, and once filled that unit may act, either attacking or casting spells. Taking action then causes the gauge to empty, and the cycle repeats itself until the battle ends.
One unique aspect to Active Time Battle systems is the constant flow of time, even when in the combat menus. This often allows for some unique encounters, such as bosses that have weak points that only become exposed at certain points in battle, requiring the player to time their attacks. It also tends to create a constant pressure to perform actions in a timely manner, adding tension to the battles.
The ATB system was designed by Hiroyuki Ito during the development of Final Fantasy IV for the SNES. Time gauges for each party member were added in Final Fantasy V, but the system still gave the impression of being turn-based as the gauges filled one block at a time. More fluid motion was introduced in Final Fantasy VI.
ATB became the system of choice for (then) Squaresoft's trio of Playstation era Final Fantasy titles - VII, VIII and IX. As RPGs have evolved, many developers (including Square Enix) have moved away from traditional ATB. Final Fantasy X used the Conditional Turn-Based Battle system, and although ATB returned in Final Fantasy XII and XIII, they played a lot differently due to the gambits (XII) and paradigm (XIII) systems.