We have backwardation when the term structure curve is down-slopping. This is happening when the future contracts with distant delivery dates are cheaper than those with closer delivery dates. The term structure of WTI crude oil contracts as depicted on September 28, 2012 is in backwardation (below).

The market is in contango when the term structure curve is up-slopping. This is happening when the future contracts with distant delivery dates are more expensive than those with closer delivery dates. The term structure of coffee ice contracts (NYBOT exchange) as depicted on September 28, 2012 is in contango (below).