A liberal arts college is an institution of higher education found [mostly] in the United States, offering programs in the liberal arts at the post-secondary level. They encourage — and often require — their students to take a substantial number of classes in topics which may not directly relate to their vocational goals, in an effort to provide a "well-rounded" education. They may be distinguished from colleges offering programs primarily in business, engineering and technology, the trades, the fine arts, theology, or other specialized subjects.
Ostensibly, these are distinct from larger universities, but in fact the undergraduate curriculum in almost every US university you've ever heard of such as Harvard, Yale and Berkeley, for example, and to some extent even MIT and Caltech, is designed this way. Partly, this is because American high school isn't quite as rigourous, nor as specialized, as its counterparts elsewhere. But partly this denotes a philosophical distinction about the purpose of a University education: in the UK, universities are to some extent vocational, even if the vocation is physics or English Literature -- so why study anything else? In the US, the university is -- to use a voguish term -- aspirational: attending one of these places is supposed to make you a better, more well-rounded, person (in addition to making you a physicist, or English scholar). Having gone through that system, I'm quite happy to have been "forced" to take courses in literature, philosophy and economics (this despite US students mostly being fee-paying "customers"). Nowadays, of course, even in the UK, the vocational argument doesn't quite work anymore; a relatively small number of our graduates go on to do physics (anecdotally, of the eight undergrads entering in 2001 for whom I was the personal tutor, only one has gone on to do more physics). Unfortunately, my one-man crusade to change the UK educational system isn't going anywhere, but feel free to let me know if you agree.