Dispensationalism: A method of interpreting the Bible that divides history into distinct eras or "dispensations" in which God deals with man in a distinctive way and, in some cases, in which God's ethical standards change. A leading distinctive of dispensationalism is the sharp division between ethnic Israel and the church of Jesus Christ. Orthodox Christianity has traditionally held that the church of Jesus Christ is the New Israel; dispensationalists hold that ethnic Israel and the church of Jesus Christ are two separate, distinct entities in God's program. All dispensationalists are premillennial, but not all premillennialists are dispensationalists.
From
www.reformationonline.com
Teaching that history is divided into various time periods during which God moves in the world in certain distinctive ways. Hence, "dispensation of innocence," "dispensation of government," "dispensation of law," "dispensation of grace," and "kingdom economy," etc. The Greek word means "economy" or "administration." Several different schools of dispensationalism exist.
From
http://focusonjerusalem.com/biblicalterms.html