Answer:
a type of payment
Explanation:
From the sentence above, the speaker says that Maw and Meggins deny that they are responsible for whatever they were being accused of and they admit to no liability at all, but because of "consideration" of the services of her son, they are ready to provide a "certain sum" as a type of compensation.
We can directly infer that the meaning of the word "compensation" is a type of payment
Answer:
Definitely formal English as formal English is used in formal settings. Both the examples you gave are formal settings.