"Contention is basically sharing. If you live in a house with teenage girls then you contend the bathroom with them - which can mean waiting hours to get in. Your electricity is contended - normally not a problem as there's more than enough to go around however tell that to the residents of California the other year who had rolling blackouts due to a lack of generating capacity. Everything in life is contended - it's an effective way to utilise a shared resource." (- thanks to adslguide.org.uk for this pithy definition!)
Regarding ADSL - there are two levels of contention on the BTwholesale network at the moment: 50:1 and 20:1. If you take the worst case scenario for the 50:1 user then that means you're sharing your 500kbs with 49 other people. If you are all downloading at the same time then you'll get 10kbs - about a quarter of the speed of a normal dial-up analogue modem. In reality, it's unlikely BT will allow this to happen. Despite extremely rapid broadband takeup over the last few years, most users are still able to download and upload at the maximum quoted speed.
It is clear that with a 20:1 contention, if everyone that you are sharing your line with decides to download a movie at the same time, your line will slow down LESS than if you are on a 50:1 contention line. Remember though, if you are not getting the speed you expect it can be due to the contention ratio but also to many other factors including the capacity of the remote site you are accessing or the quality and length of your telephone line from the local BT exchange.
There is a broadband speed test available at ADSLguide.org »