This is the payment the employer is making to settle all your claims and to compensate you for the termination of your employment.
Up to £30,000 may be payable without deductions of tax or National Insurance.
This payment may include a statutory redundancy payment. (Redundancy Payment Calculator)
If you were to take a claim against your employer, any claim is normally calculated by reference to future loss of earnings, in other words what your net losses would be until you find new employment (based on your previous net earnings)*. This is therefore often the basis upon which a settlement payment is based. The main exception to this is that a tribunal can award a level of additional compensation for injury to feelings and personal injury in discrimination claims (but this is rarely more than £30,000).
* Currently the maximum compesnation which can be awarded for unfair dismissal is £78,962. Discrimination and Whistleblowing claims are unlimited but still largely based on loss of earnings.