Money held inside the cost baseline, or time held inside the schedule baseline, for risks already identified, assessed and priced, and drawn on by the project manager as they occur.
A contingency reserve is the priced residue of a risk analysis. Every pound in it traces back to a line in a register that was scored, given a response, and then costed for whatever exposure the response left behind, which is what makes it a reserve for known unknowns rather than a rounding allowance. Because it sits inside the approved cost baseline, spending it is expected rather than exceptional and does not change the budget the project is measured against. Expressed in working days instead of pounds it is usually called a contingency buffer, and the sizing logic is identical.
See also
Money held above the cost baseline for exposure nobody identified during planning, released by the sponsor or the funding body and never by the project manager.
The approved, time phased budget a project is measured against, made up of the priced work packages plus their contingency reserve, and excluding management reserve.
The list of events that could affect the work but have not yet, each scored for likelihood and impact, with an owner and a planned response.