Channel setting is a method whereby stones are suspended between two bars or strips of metal, called channels.
Often when setting small stones and the bars go in a linear line with the design it is called channel setting, and when the bars cross the lines of the design, it is called bar set. The idea is the same, though.
The channel is some variation of a “U” shape, with two sides and a bottom. The sides are made just a bit narrower than the width of the stone or stones to be set, and then, using the same burs as in prong setting, a small notch, which is again called a bearing, is cut into each wall. The stone is put in place in those notches, and the metal on top is pushed down, tightening the stone in place.