A workflow is often described as a series of tasks that produce an outcome. A workflow in Microsoft SharePoint Online is the automated movement of documents through a sequence of actions related to a business process. SharePoint offers a three state workflow.

The three state workflow is used to manage business processes that require organisations to track the status of an issue or item through three different states and two transitions between the states. With each transition between states, the workflow assigns a task to a person and sends that person an e-mail alert about the task. When this task is completed, the workflow updates the status of the item and progresses to the next state.

The three state workflow is designed to work with the Issue Tracking list template, but it can be used with any list that is set up to contain a Choice column with three or more values. The values in this Choice column serve as the states that the workflow tracks.

Workflows can streamline the cost and time required to coordinate common business processes, such as project approval or document review, by managing and tracking the human tasks involved with these processes. http://technet.microsoft.com/en-us/library/dd285475.aspx