Distribution is how albums get into shops. Distribution companies sign deals with record labels (or very rarely, directly with artists) that gives them the right to sell that label's products to record stores that have an account with that distributor. The distributor takes a cut of income from each album sold and then pays the label the remaining balance.
Some distributors expect a record label to provide them with finished product, but sometimes a distributor will do an "M&D" deal with a label. M&D stands for manufacturing and distribution. With this set up, the distributor will pay for all of the manufacturing costs of an album up front, and then keep all of the income from the album until that initial investment is paid off.
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