Verification is a process dealing with Pell grants. After you will out a FAFSA, you will be notified on your SAR (Student Aid Report) that you have been verified; your school will probably also notify you. This means that in order for your Pell grant to go through, the school has to document that the information on your FAFSA is correct. This means copies of taxes, a verification form, and any other copies of documents that are needed to support information that had been reported on the FAFSA.
Sometimes, you are verified because there is a mistake in the info that was reported in the FAFSA. Maybe your AGI was entered wrong or the tax wasn't right. Sometimes, you are verified even if the information is correct because the Dept of Ed wants the Financial Aid Dept to take a close look at your information to make sure it's all right. This has been mentioned at meetings before and the response was "there is something in the student's history that warrants a second look at their information". However, sometimes I really believe it is random.
Beginning in 2012, every student that is selected for verification has to be verified. Before, the rule was that 30% of those selected had to be verified. Our school always verifies everyone that is selected, so it's no big deal for us. If you are selected and you refuse to turn in the selected materials, then you cannot receive a Pell grant or have Stafford loans. It's best to take care of the verification as soon as you can to avoid unnecessary problems.