In his Politics, Aristotle divides government into 6 kinds, 3 good and 3 bad. The good forms are monarchy, aristocracy, and polity, while the bad forms are tyranny, oligarchy, and democracy. Each of the good forms has the possibility of turning into its bad form - i.e., monarchy into tyranny, aristocracy into oligarchy.
Seeing that democracy is listed in the "bad camp", people automatically assume that Aristotle was anti-democratic. But this is an over-simplification.
By democracy, Aristotle really means mob rule. Polity corresponds more to what we'd think of as modern democracy - a stable, orderly institution that represents and protects the people. For instance, polity is what existed in Athens during its Golden Age. Aristotle didn't oppose this by any means.
Indeed, unlike his teacher Plato, who sought to create an ideal model of the state ruled by philosopher-kings, Aristotle thought that the best form of government was determined by the situation. For a virtuous people, polity could very well be the best form of government; for a subservient people (and Aristotle believed that such people existed), monarchy or tyranny might be the natural state of affairs.
