Basically, the auction will have a scheduled close time - for example 3pm. If there are no bids in the last 3 minutes before 3pm, the auction will close as normal. If however someone places a bid at 2.59pm, the auction is automatically extended by 3 minutes, until 3.02pm. If there are no further bids then the auction closes at 3.02pm. If someone bids at 3.01pm, then the auction automatically extends until 3.04pm, etc. i.e another 3 minutes. This simulates the "Going, going ... gone" nature of traditional live auctions.

The Seller selects this option when creating their listing, so if this option is selected, it will be indicated on the item page next to the closing time with the following wording - "Extends with late bids".