[nadaviv]

There's one big difference here: with Bitcoin's multi-signature transactions, you can require the agreement of two of the buyer, seller and arbiter in order to release the funds. The arbiter cannot move funds on its own and must have the cooperation of one of the other parties, which means that he doesn't actually control nor hold any funds. The legal situation here is a classic binding arbitration, and not an escrow - which are very strictly regulated, require licensing in some parts of the world and have a very high costs of operations due to bonds and securities.

Dealing with arbitration services rather than with escrow makes this much simpler, drops the entry/operational costs to nearly nothing and does not even require a lawyer to assist you with the process. This lowers the barriers of entry significantly and allows to create a competitive market for arbitration services in a way that's simply not possible when an escrow is required, leading to reduced end-user costs and improved service quality.

Source: I'm the founder of Bitrated [1], a service that enables exactly those kinds of arbitration services, and received extensive legal advice on this matter from my attorney. Do note, however, that this is a new and somewhat gray territory that can be interpreted in multiple ways (and of course, IANAL/TINLA apply - ask your own lawyer before doing anything.)

(P.S. Bitrated v2, a complete rewrite I've been working on for the past 6 months, which now includes an identity & reputation management system, is about to be shortly released. If anyone is interested, you can follow @bitrated on twitter for updates. </shameless-promotion>)

[1] https://www.bitrated.com/