A payment plan is similar to a typical car loan. You agree to pay the IRS each month a specific amount for a length of time. Interest will be added to the tax balance each month until it is paid in full.
We want the IRS to agree to terms that you can realistically afford to pay each month while allowing you to keep up on your other bills and current taxes.
When used with other solutions like penalty abatement and statute of limitations, this can have a similar result as an Offer In Compromise.