In English, amortization is applied to the value of items purchased. [Depreciation is for physical assets, such as machinery and equiment]/ There is cost associated with the purchase, say of a loan. The loan will cost you the principle plus the interest over a period of time, say 30 years. These costs can be DEDUCTED as an expense every year on tax returns. There are different calculation methods for doing this costing over time and then deducting the expense. A simple way, just so you get the idea:
You borrow 1,000.
With interest, over five years, it will cost you 1,100 total. You amortize the expense ie the cost of the interest, by deducting, for exxample, 20 dollars a year as an expense from your taxes over five years. That's it in a nutshell. One amortizes over the life of something one buys at a rate of interest.

HTH

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Note added at 28 mins (2004-05-04 20:58:25 GMT)
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Please note: In Latin languages the distinction is not the same as in English. In English, we depreciate plant and equipment and amortize loans and other interest-bearing things...In French, for example, it\'s the opposite. You depreciate a loan and amortize the physical plant and equipment.

whoops one mistake: depreciation is for tax returns...amortization just reduces your costs....sorry