An emulsion is a mixture of normally immiscible fluids (eg.oil & water). They are prepared with the help of an emulsifying agent, which is usually acacia gum. The emulsifying agent increases the viscosity of the water, reduces the surface tension between the water and the oil, and thus reduces the coalescence of the oil, and increases the surface charge of the oil to attract water to it.
The most common use of an emulsion is to administer essential or volatile oils internally (eg. an emulsion of Mentha piperita for indigestion).
How to make an Emulsion