Short Explanation
Perpetual Futures are Futures contracts that never expire. This means that there is no settlement and that traders can hold their position for as long as they want.
A funding mechanism, where longs pay shorts (or vice versa), ensures that the price of the Perpetual Future tracks the spot price of the underlying asset. For instance, for the BTC Perpetual Future, the price would be an average of the spot prices for BTC at the top spot exchanges.
For a more in-depth guide on Perpetual Futures, check the following blog post.
Example (BTC-PERP)
The BTC-PERP pair is a Perpetual Future.
The price is denominated in dollars per Bitcoin.
Traders go either long or short on the contract.
The notional value of the position is denominated in dollars.
Margin is required to open a position.
The margin is in Bitcoin and the payout is in Bitcoin.
There is no settlement. Traders can have their position open for as long as they want.
When a trader wants to close his position, he simply clicks the close button. Then his profit or loss (P&L) is immediately credited to his cash balance.