The Secret Peace is an agreement between the ruling classes of Camorr, led by Duke Nicovante, and the criminal underworld, led by Capa Barsavi. It allows for the existence of organized crime with the understanding that the nobles and the servants of justice are off limits.
The Secret Peace was brokered between Capa Barsavi and Duke Nicovante when Barsavi first took over Camorr's criminal underworld. It states that so long as no thief or criminal wrongs a member of Camorr's nobilty, or anyone in the direct employ of the nobility such as the yellowjackets or blackjackets, said nobility and their armed men will not seek to undermine and end the various syndicates or the capa's rule.
This does not mean that criminals are free of the fear of retribution from the state. If a thief is caught pickpocketing, or a burglar caught breaking and entering, or a murderer convicted of a death, these people would still answer to the laws of the Duke. It simply means that so long as a criminal does not take advantage of the nobles or the guard, and gets away with whatever crime they did commit, the law will overlook it, trading the short term chaos for long term peace. Only the Right People and the nobility and guards know of the peace, hence it's secrecy.
Should any of the Right People break the secret peace, their biggest fear is not of the law, or any punishment brought down by the law, it is the capa of Camorr. Breaking the secret peace requires immediate retribution. Traditionally, the criminal's garrista must go to the capa and purchase the wrongdoer's death. This is done with a monetary settlement in exchange for a single wolf shark's tooth, the symbol of the capa, symbolically transferring the possession of the wrongdoer's fate from the capa to whoever holds the tooth. This is because as a member of the Right People, and therefore a member of the capa's family, any breaking of the Secret Peace is the responsibility of the capa, much like any crime committed by a child is the responsibility of the child's parents to fix. With the tooth comes the approval and expectancy to carry out the wrongdoer's death immediately, with proof given after the fact and all wronged by the crime compensated.
Locke Lamora accidentally broke the Secret Peace by stealing from a yellowjacket when he was a young boy. He was then taken in by Father Chains and the Gentlemen Bastards, who later made a habit of breaking the Peace.