Is this a transaction between the mortgagor and the mortgagee, or is this term also used in finance when selling or buying stock. In finance - selling "short" is an options phenomena, but it apparently means something entirely different in real estate transactions. Any commentary, or answer would be appreciated.

There are short sales in stocks and in real estate.
In real estate, lets say you owe 100,000 on the property, but can only get a offer for 90,000 from a buyer. You present this contract to the mortgage company and they may accept the 90,000 as payment and release the mortgage. The mortgage company does not have to accept them, and often have rules, as to max percentage they will allow a real estate broker.