Cremation is a method used to dispose of the remains of a deceased person, and involves burning the body of a deceased person.
Following Zarabeth's death, Zar preferred that his mother's body was cremated, but he was not able to obtain any firewood to do so. Spock later performed the cremation using a hand phaser. (TOS novel: Yesterday's Son)
Cremation was one of the procedures used throughout most of the galaxy to dispose of the remains of sentient creatures. Speculatively, this was done due to the incredible population (both past and present) of the galaxy and the resulting lack of space available for burials. There may also have been cultural and religious reasons that sentient beings chose cremation.
Cremation usually took the form of a solemn funeral pyre, with the deceased individual's friends and family observing the process. On battlefields and similar locations where large numbers of sentients died, the bodies were often piled and burnt en masse for expediency, but the process was still done solemnly and with as much respect as possible.
During the Galactic Civil War, Imperial control of Corellia made it difficult to return the bodies of Corellians who died away from their homeworld. Deceased Corellian exiles were often cremated, and the carbon residue was compressed into synthetic diamonds. These diamonds were then taken to the Corellian Sanctuary which was established after the New Republic took possession of the world. But during the Second Corellian Crisis the Sanctuary was vandalized by Alliance supporters.
A popular alternative to cremation was Burial. The Jedi Yoda and Obi-Wan Kenobi left no corpses when they died, instead becoming "one with the Force". Anakin Skywalker may also have become one with the Force, but sources are unclear. When Mara Jade died, she left her body behind. One week later during her funeral her remains were set on a cremation pyre, with the intention that they would be cremated at the conclusion of the service - however Mara chose to return her body to the force during the ceremony.
Examples of cremation in the Star Wars films:
Examples of cremation in the Expanded Universe: