Surge Capacitors

Capacitors are storage devices. They tend to hold a charge but more importantly, in this case, they also tend to hold "no charge." That is, if you suddenly remove a voltage source from capacitor it will hold the voltage until some current path discharges it but also, if you suddenly apply a voltage to a capacitor, it will tend to stay at it's original voltage until the available current charges it and changes that voltage.

Therefore, when the contacts of the relay or switch remain closed, the voltage across them is zero. When they open, the voltage quickly tries to go up to the full line voltage. During the short period of time when the contacts are still extremely close together and the voltage between them is rising, any one of several conditions can lead to the formation of an arc. Now, with a capacitor across the contacts, that voltage across the contacts is held close to zero for long enough for the contacts to safely separate without forming an arc.

A Surge capacitor is a device designed to absorb surges.