A centroid is the balance point or center of mass for an area. The centroids tool can also

Create Points at Area Centroids

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.

Choosing Create a Single Point for Grouped Areaswill create a single center of mass point for grouped areas rather than a separate point for each area.

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.

Create Points at Centroid of Selected Point Features

It is also possible to find the center of a set of points. This will average the X and Y values of the selected points to find the centroid.

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.