Activity diagrams show the procedural flow of control between two or more class objects while processing an activity. Activity diagrams can be used to model higher-level business process at the business unit level, or to model low-level internal class actions. In my experience, activity diagrams are best used to model higher-level processes, such as how the company is currently doing business, or how it would like to do business. This is because activity diagrams are "less technical" in appearance, compared to sequence diagrams, and business-minded people tend to understand them more quickly.
An activity diagram's notation set is similar to that used in a statechart diagram. Like a statechart diagram, the activity diagram starts with a solid circle connected to the initial activity. The activity is modeled by drawing a rectangle with rounded edges, enclosing the activity's name. Activities can be connected to other activities through transition lines, or to decision points that connect to different activities guarded by conditions of the decision point. Activities that terminate the modeled process are connected to a termination point (just as in a statechart diagram). Optionally, the activities can be grouped into swimlanes, which are used to indicate the object that actually performs the activity, as shown in Figure 6.
Figure 6: Activity diagram, with two swimlanes to indicate control of activity by two objects: the band manager, and the reporting tool
In our example activity diagram, we have two swimlanes because we have two objects that control separate activities: a band manager and a reporting tool. The process starts with the band manager electing to view the sales report for one of his bands. The reporting tool then retrieves and displays all the bands that person manages and asks him to choose one. After the band manager selects a band, the reporting tool retrieves the sales information and displays the sales report. The activity diagram shows that displaying the report is the last step in the process.