As matched bettors, we will be placing back bets at the bookmakers and lay bets at the exchanges. This is how we ensure all outcomes are covered. 

A back bet will most commonly be placed at the bookmakers. When placing a back bet you are betting for that horse or football team to win. You win the back bet if the team/horse that you bet on won the event.

A lay bet is placed at an exchange. When placing a lay bet you are betting on a team or horse NOT to win. You only win the lay bet if the team/horse that you bet on did NOT win the event.

Here's an example of a Horse Racing Back and Lay Bet - 

You place a back bet at the bookmakers on a horse named Seabiscuit, this bet will win if Seabiscuit wins the race.

You place a lay bet at the exchange on Seabiscuit NOT to win. This bet will win if any other horse in the race finishes in 1st place. 

You have covered all outcomes here as if Seabiscuit wins the race, you win your bet at the bookmakers. If Seabiscuit doesn't win the race (any other horse comes in 1st place) you win your lay bet at the exchange.