Hobson's choice is a condition presented in such a way that it appears as if an individual has a choice in the matter, but the outcome has already been decided.
The most famous example of this is the quote from Henry Ford, wherein he offers his customers the choice of any color they want, as long as it is black. In this situation, the customer doesn't really have a choice, since only black cars are available, but the phrasing of the situation makes it appear as if the choice is real and makes a difference.
As opposed to a choice, which consists of picking the better option of two or more available options, such a situation requires an individual to make a choice on whether to have something or not. For instance, if the Ford factory had really been able to paint their cars in whatever colors their customers chose, the choice would have been real, and would have had an effect on the outcome. But since all the cars were painted black anyway, the choice for the customers really was between having a car or not, rather than picking a color of their choice.
The origin of the term goes back to the 16th century. It was named after a livery stable owner called Thomas Hobson, in Cambridge, England. He had over 40 horses in his stable, and some of them were of reputed breeds. Obviously, if his customers were given the option of choosing any horse that they wanted, they would choose the best, and then that horse would be overused. So he devised a plan to periodically change the placement of horses in the stable, and asked his customers to choose between the horse that was closest to the stable door, or no horse at all. Of course, his customers had no option but to be happy with whatever horse they got.
Almost every one uses or encounters such a situation in their daily lives, it's just that we never realize it.