A living trust* (aka "Inter Vivos Trust") is an alternative to having a will. You can achieve the same ends as regards your assets when using a living trust, as you do with a will, with the added advantage that living trusts do not need to be probated in order to distribute your assets to your beneficiaries. The other advantage that a living trust has over a will is that it not made public as it does not have to be sanctioned by a probate court. Note that the a basic living trust can help you avoid probate, but will not help you avoid federal or state estate taxes. If you wish to reduce estate taxes, you'll have to set up specific types of trusts.
Living trusts are revocable, and are therefore sometimes referred to as revocable living trusts. Essentially, you transfer your assets to the trust while you are alive, and upon your passing, the trust distributes your assets to your designated beneficiaries. To ensure that all your assets are given to your intended beneficiaries, you have to diligently transfer them to the trust; any asset not covered by the trust will fall to distribution under intestate rules of your state of residence. This means that it is possible that the people who inherit such assets not under the trust may not be the ones who you intended to give those particular assets to. One way around this is to use a simple will as a "catch-all" legal device by which any of your assets not moved over to the trust while you're alive are distributed to your named beneficiaries under this will upon your demise.
The paperwork relating to a living trust is often just as detailed as that in a will. You will, for example, need to create a new property deed if you intend to transfer your home or other real estate to the trust. You can be the trustee of your own living trust, or engage someone else to be your trustee. During your lifetime, you can move your assets in or out of the trust, change beneficiaries, or trustees, without having to set up an entirely new trust. If you wished to do the same with a will, you'd have to create a new will to replace the existing one.
One last thing to note about living trusts is that if you have minor children, the living trust will not address your plans for guardianship. The guardianship of minor children must be dealt with via terms set out in a will. For this reason, most parents opt to have both a simple will that provide for the guardianship of their children, and for their financial and real estate and other assets to be dealt with outside probate under a living trust. The benefit of having a living trust in cases where guardianship becomes a reality is that financial resources required by the legal guardian for the care of the children can be quickly released by the trust, as opposed to being held up in probate as such assets are not part of the will.
(*Note: do not confuse "living trust" with "living will"; the latter is a legal document that governs your wishes as regards your end-of-life medical care.)