what is mutual understanding?

how does mutual understanding work, anyway?

Mutual understand is when two people come to an agreement and settle their terms. It usually ends up both of them are losing out, but not as much if they were disagreeing.

An example would be in a case of divorce. When they need to settle the dispute, they would have to come to a mutual understand. They sort matters out like, who gets what. If you ever saw the movie "Wedding Crashers", and remember the beginning where the couple want to divorce.

That agreement is called a mutual understand. And it can work for many things.

isn't it just a topic which both participating partys understand

it doesnt.
either way..
its not always mutual

Basically it is an agreement to settle a dispute. Both parties would end up on the same page at the end.