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Three words concatinated: All, Be, It. 
Meaning: Even though; although; notwithstanding: For example, "Reality is merely an illusion, albeit a very persistent one." — Albert Einstein

[Middle English al be it : al, even if; see all + be, subjunctive of ben, to be; see be + it, it; see it.]

The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2003. Published by Houghton Mifflin Company. All rights reserved.


Erik Hallberg wrote:

One of my favorite quotes is from Albert Einstein, who said, "Reality is merely an illusion, albeit a very persistent one." In use, albeit seems to work as a fancy form of "but," which is a perfectly good word most everyone uses correctly. Is albeit therefore simply a verbal flourish, a synonym of "but" without a specifically different meaning, or is there more to the story? "All be it" would appear to be the building blocks of albeit, in the sense of "all that it is." To my mind, this would work if the idea was broken down into "…but when you consider the whole of it…" Or am I trying too hard to make literal sense of an odd word?

Albeit may be an odd, archaic-sounding verbal flourish, but as a conjunction it has been flourishing since Chaucer’s time. As you imply, it literally means ‘all (completely, entirely) though it be’. The actual meaning of albeit is closer to ‘even though or even if; although (it be)’, and just like although, though, it is sometimes used to begin a clause: "He can ask for a loan, albeit I do not think he will get it." Here albeit implies an opposition or contrast, and yes, it is very similar to but.

However, the Albert Einstein quote shows the more common use of albeit in a concessive phrase," one that expresses some sort of conceding, yielding, or admitting. In this use albeit can mean ‘conceding or admitting that; in spite of the fact that’, and the word notwithstanding can sometimes be substituted.

In the word albeit, the verb "be" is the third person singular present subjunctive. (The corresponding indicative form would be "is.") In subjunctive constructions, the order of subject and verb is sometimes reversed: "Be it ever so humble…; Be it feast or famine…" (Patrick Henry’s exclamation, "If this be treason, make the most of it," is an example of a subjunctive construction in which subject and verb are in the usual order.)

Historically, the adverb all has been used with the conjunctions if and though, and often the order was reversed, producing "all if, all though." The phrase "all though" was originally an emphatic form of though, which later became although. Sometimes the conjunction if or though was dropped if the verb was placed before the subject, leaving all as an apparent conjunction, in the sense of "even if, even though, although." So the phrase "al be it" meant ‘although it be’, which later became the one-word form albeit.