The escrow company is a neutral third party responsible for all the details involved in opening, maintaining, and closing each transaction. The escrow agent is responsible for holding the earnest money deposit and making sure the terms of the agreement between the buyer and seller are properly executed.
Escrow is opened when a fully executed purchase agreement and supporting documents are presented to escrow. The Buyer makes their agreed upon earnest money deposit, and escrow holds it until the terms are fulfilled by both parties. In typical real estate transactions, the Buyer does not pay the Seller directly. They submit all funds due directly to escrow who then disperses it per the terms of the agreement.
A title company is different from escrow. The title company is a third party that protects both the home buyer and the lender. Essentially, they make sure that a seller has the rights to sell the property to a buyer. Once a title insurance company has completed its verification, it backs that guarantee with title insurance, which protects the lender and/or the new homeowner if someone makes a claim to the property in the future.
Every state has specific licenses to regulate all title and escrow companies.