Quick definition
Liquefaction is what happens when loose, water-saturated soil temporarily loses its strength during earthquake shaking and behaves like a thick liquid. Buildings can tip, sink, or float; the ground itself can flow downhill.

How to think about it

Soil is normally a stack of grains pressing against each other, that grain-to-grain contact is what gives soil its strength. When the soil is saturated (water fills the spaces between grains) and shaking starts, the grains briefly lose contact with each other. The water takes over the load. For seconds to minutes, that patch of ground stops behaving like solid earth and starts behaving like a thick fluid: denser than water, but moving and flowing.

When the shaking stops, the grains settle back into contact and the ground re-solidifies, but anything that sank, tilted, or slid is now in a different place than where it started. That's the damage.

Three conditions have to be true for liquefaction to happen:

Example: Anchorage, 1964

The Great Alaska earthquake (M9.2: the second-largest ever recorded) lasted nearly five minutes. In Anchorage, the Turnagain Heights neighborhood had been built on a bluff of saturated marine clay overlooking Cook Inlet. When the shaking liquefied the clay layer beneath it, the entire neighborhood, houses, streets, foundations, slid laterally downhill. Whole blocks of homes were carried hundreds of meters toward the inlet on what was effectively a slow-moving mudslide.

The houses themselves were largely intact. The ground they stood on had simply moved.

Common confusions

Where this shows up in the course

Diagram

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TBD: cross-section diagram showing saturated soil before, during, and after shaking. Wikimedia Commons has good options: find one with CC licensing.