Dispersion of immiscible droplets of a liquid into another liquid is called emulsion. Its a liquid-liquid type colloidal system.
Since, water and oil are two immiscible liquids, therefore, two types of emulsions are defined depending on the relative concentration of the two.
1. Oil dispersed in water (O/W type)- Amount of water is very large in comparison to oil and therefore acts as the dispersion medium. For example, milk as it contains liquid fat dispersed in water.
2. Water dispersed in oil (W/O type)- Amount of oil is very large in comparison to water, therefore it is the dispersion medium. For example, butter.
Either of the emulsions can be diluted with the dispersion medium.