The activated sludge process is a method of treating sewage and waste water through microbial oxidation.
Sewage previously treated in settling tanks is aerated to encourage the growth of non-pathogenic aerobic microorganisms (bacteria, yeasts, molds and protozoans) which break the organic matter down into carbon dioxide, water, and simple salts. After this activated sludge is produced, the waste water undergoes further processing through anaerobic digestion, filtering, and chlorination.
The information in this writeup was taken from the science dictionary at http://biotech.icmb.utexas.edu/; I oversaw the development of the dictionary (the website was mothballed in 1998) and I believe I wrote the entry this is based on.