A federation replaces a single custodian with a threshold of signers: a peg-out requires, say, eleven of fifteen. It is more robust than one company and less open than the base chain, and it is still a set of named parties who can pause, delay or refuse.
Liquid's federation of functionaries controls the release of bitcoin backing L-BTC. Holders keep the keys to their L-BTC; they do not keep the keys to the exit.
When the Gazette reports on a federated system it asks how many signers, who they are, and what happens when they stop.