A centroid is the balance point or center of mass for an area. The centroids tool can also
To create new point features from the centroids of selected area features, or from the vertices of selected line and area features by selecting one or more areas or lines, and then right-clicking and selecting the Create New Points at Centroids of Selected Area(s) option under the Advanced Feature Creation menu.
This will bring up the Area Centroid Options dialogue.
Use Move Centroid Point if Outside Area Boundary to force the center point to be inside of the area feature. In an irregularly shaped feature, such as an L shape, the balance may not be inside the area. This option will force the centroid inside the area feature.
To find the centroid, select the point features with the Digitizer tool, then choose Create Points at Centroid of Selected Point Features from the Digitizer menu or context menu under Advanced Feature Creation.