Monopolistic competition, going to break this down to layman's terms. Monopolistic competition is one of the four possible market structures, the other three are perfect competition, monopoly and oligopoly. In monopolistic competition there are many firms in an industry without any clear leaders, also its is an easy industry to enter, firms sell similar products and the consumer has good knowledge base. Although this is similar to perfect competition there is few discrepancies and it is here where firms can stand out. Firms can use product differentiation whether it be advertising, location, service or physical differences.
The example I'm going to use is the many Vietnamese restaurants located in the Asian Village in Edmonton. How does one Vietnamese restaurant set itself apart from the others? As you search for some lunch you may use Google on your phone to search for reviews, could use clues from outside appearance, location, local traffic or that you remember Hoa An has the best Pho soup. It will be these differences that allow a firm earn economic profit without reaching product efficiency.
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