A specialist is a member of a stock exchange who acts as the market maker to maintain liquidity in a given stock. The specialist keeps an inventory of the stock, posts the bid and ask prices, manages limit orders and executes trades. Specialists are required to trade out of their own inventory, if necessary, to manage large movements in the stock's price. If a big shift in demand occurs either on the buy side or the sell side, the specialist sells stock out of his own inventory to meet the demand, thus narrowing the gap.
Generally, one specialist per stock stands ready to step in and buy or sell as many shares as needed to ensure a fair and orderly market in that security.