An etalon refers to an interference type filter typically used in Solar Telescopes because of the desire for an ultra narrow bandpass.
An etalon is probably one of the simplest designs for an optical filter utilizing some of the most precise optical specifications. Due to it both being simple and the need for precision, there are many compromises that can influence the quality of an etalon filter.
An etalon is comprised of 2 flat and parallel optical surface that have been optically coated with a high reflective dielectric layer with the high reflector layer peaking at the desired bandpass point for best results. These optical surfaces are seperated by a gap. This gap can be either air or a solid material. The light resonates in the gap by internal reflection off the highly reflective layers on the surfaces. Thru interference at this gap, only light meeting the correct angle of incidence to the surface and is not "interfered with" can pass, all other light is lost.
The main parameters that define an etalon are:
Bandpass: This is the width of the curve that defines the transmitance of the filter at 50% of the total transmision of the filter. An etalon's transmission has a broad base and a sharp peak. Typically the peak transmission should be between 80-90%, so the bandpass of the etalon will be measured between the 40-45% points. For Solar applications it is generally accepted that the lower this number, the better. Typical Solar Etalons have a bandpass of <1.0.