Definition
IPO Allotment is the process of assigning shares to investors who have applied for an IPO. The allotment takes place after the IPO closes. If you have been allotted shares, they are credited to your demat account.
Example
Suppose a company reserves a certain number of shares for individual (retail) investors in its IPO, but many more investors apply than there are shares available. Since everyone cannot receive an allotment, the shares are allotted through a computerised random draw.
If you applied for the smallest number of shares allowed, called one lot, and your application is selected, the allotted shares are credited to your demat account. If you are not selected, the amount put on hold in your bank account is released, and you can use it again.
Caution
Applying for an IPO does not guarantee allotment, especially when the issue is heavily subscribed. Even if shares are allotted, a gain on listing is not assured.