A federation is an organization made up of smaller groups, parties, or states. The United States is a federation; the states all fall under the same federal government.
The word federation may be most familiar as part of the name of an organization — for example, the International Tennis Federation, the American Advertising Federation, or the National Wild Turkey Federation. If you follow World Cup soccer, you may interested to learn that the acronym FIFA stands for Fédération Internationale de Football Association. Although the groups within a federation are united around a common goal or ideology, they usually like to keep some control at the local level as well.