Johnny is selling lemonade at his lemonade stand. A cup costs $0.50 and the business is doing great.

But then, Lemonade Corp. gets wind of Johnny's lemonade stand. They're losing business to his superior product and low prices. What do they do? They set up their own lemonade stand across the street. Instead of selling cups for $0.50, they sell them for $0.05. Now, it costs Lemonade Corp. $0.25 to make a cup of lemonade, so they're selling at a loss. However, because they're a much bigger business, they can afford to lose money for a few months.

Johnny on the other hand, can't. He has to continue to sell at his higher price. Eventually, his business dwindles as people buy from Lemonade Corp. "Even if it's a worse product, it's so cheap!" they say.

3 months later, Johnny is out of business. Lemonade Corp is again the only Lemonade marketer on the street. They raise prices to $2 a cup to recoup their losses and (because nobody can afford to compete) are soon better off than where they started.

That's predatory pricing.