Hi-lo is a modifier to a poker game that can be applied to most poker variants, which indicates that at the showdown of the hand, the pot will be split: half of the pot will go to the player or players who have the best or highest hand, and half the pot will go to the player or players who have the lowest hand. It is sometimes spelled high-low, but is most often abbreviated to hi-lo.
High hands are ranked according to standard hand rankings; low hands are ranked according to low hand ranking. Typically, hi-lo games are played with a qualifier for low hands; hands above a certain rank are not considered to be valid lows. In most variants, it is possible for a single player's hand to play for both high and low simultaneously, though the rules of some variants may require that players declare which half of the pot they are attempting to win (or declare that they are trying to win both high and low).
The high portion of the pot is always awarded, since one player always has the best hand (or may have tied with other players). However, because low hands often must match a qualifier, there are cases where there is no low hand which is playable (no hand that meets the qualifier) in a given hand. In this case, the low half of the pot is also awarded to the winner(s) of the high half.
If the hand is not played to the showdown (all players except one fold before the river), the last remaining player takes the entire pot, as though they had both the best high and low hands - even if they do not have a qualifying low.
In hi-lo games, a number of terms are used to describe the additional situations present in games which split the pot.
Instead of chopping the pot, players say they have "won the high" or "won the low" if they have won the half of the pot in question.
Splitting a half of the pot into two portions because players have tied for high (or tied for low) is called quartering the pot. There is no special term for splitting a half of the pot into more than two portions. If a player wins one entire half of the pot (either high or low) as well as ties for the other half and hence picks up an additional quarter of the pot, this is sometimes called three-quartering the pot.
If a player is on a draw to a low, they are said to be "going for low" or "playing for low". Likewise, if they are on a draw to a high, they can be said to be "going for high" or "playing for high". If a player has a hand that is both a good high hand and a good low hand, they are said to be going both ways.
Mechanics of splitting the pot
When a pot is split between high and low winners, the pot should be divided as close to even as possible. If the pot consists of an odd number of chips which cannot be broken down into smaller chips, and therefore cannot come up even, the "odd chip" (the remaining chip which is not divisible) is awarded to the high winner(s).
If more than one player wins one of the halves of the pot by having an equivalent hand for that half (e.g. two players having an Ace-high straight for high), those players then split only the half of the pot they have won. If the half being split is not evenly divisible by the number of players splitting the half, the odd chip(s) are distributed as usual.
Note that strategy in hi-lo games changes considerably from high-only poker games. Players must constantly be aware of the existence or possible existence of players with valid lows. If a player has a hand that is only good for high, and if it seems clear that one or more players have a low, the player with the high must remember that they can at best win only half the pot. This changes the calculation of pot odds significantly: a high-only player must have a significantly stronger draw, or have a larger number of opponents, in order to make betting and/or raising worthwhile, since the amount they can win is probably only half of the pot.
Consider a simple case: two players left in a pot, one of them with a high and one of them with a low. If the high and low hands are more or less visible to both players (that is, both players see that their opponent has the other half of the pot won), and neither player has a reasonable draw which could potentially win them both halves, then there is little incentive to bet at all -- and in fact there is a bit of a disincentive, since oftentimes the house will rake the game based on a percentage of the pot. Keeping the pot small therefore saves the players a small amount of money. If, on the other hand, one of these players also has a draw which could win them both halves of the pot and the other player does not, betting strongly is always a good idea, since they are essentially freerolling for the pot.
Standard strategy in hi-lo games says that players with the current high, or with powerful high draws, should lead bet and should raise, while players with a low (even a made low!) should only call until the river. In some variants like Omaha/8, this is very good advice, since the low is always in danger of being counterfeited and also has a high probability of being duplicated in another player's hand, resulting in the players quartering the pot. In others, like 7-Stud, lows should consider betting and/or raising if they have enough opponents to make it worthwhile (say, more than 2 other opponents) and it is clear they have the nut or near-nut low.
But players going for lows should always remember that at best, they can win only half the pot: a player going for high always has the capability of scooping or three-quartering the pot if, for example, the low's draw doesn't come, or if the player going for high also has a low draw that is equal or better than the other players' lows.
Standard strategy in nearly all hi-lo games, then, is to play only starting hands that have a good chance of going both ways and scooping the whole pot. Since half the pot, even if profitable, tends to not be very profitable, it is always best to aim at scooping, which is nearly always very very profitable. This is particularly true in hi-lo games, which often pick up a number of hitchhikers due to the number of people who end up with almost-made or near-nut lows.
For hi-lo games, this means that starting hands consisting of Aces, suited cards, and low runs (e.g. A-2-3 suited in 7-Stud, or A-A-2-3 double-suited in Omaha) are generally considered the best starting hands.
Technically, it is possible to play virtually any form of poker in a hi-lo form, but in practice Omaha and 7-Stud are the most popular because they seem to play particularly well in that form.