In foreclosure - a house cannot be "a foreclosure" but rather it is "in foreclosure". When a house is in foreclosure, all it means is that the owner is behind on payments. You cannot buy a house in foreclosure unless the owner wants to sell it.
Short Sale - selling a home which is in the process of being foreclosed. In order to avoid the bank/lender foreclosing on their home, an owner can short sell the house with approval from the lender. This is a way to avoid the harsh consequences on credit and ability to borrow in the future that a foreclosure would cause.
First, the seller must prove they've had a "hardship" which can be anything from being laid off to the market crashing. Next, they call a real estate agent and list the house for sale at a fair market price. Then, once they receive an offer, the bank must approve the price. They do this by conducting a broker's price opinion (BPO) which is essentially an appraisal. Last, the bank sends a counter-offer based on the BPO. The ultimate selling price does NOT affect the home-owner whatsoever. It could sell for $500,000 or $50,000 and it wouldn't help or hurt the person short selling the house.
Bank-owned - A bank-owned property is exactly that. Once a property forecloses, the bank becomes the new owner of the property and the seller's credit and borrowing ability is damaged for 5-7 years.
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