(1) In a remote control operation, a terminal window displays the screen of the remote machine it is controlling. See remote control software.
(2) For local or remote execution of a program, it is a window in a graphical interface that is used to display a command line. For example, in Unix/Linux environments, the terminal window is widely used by developers to perform myriad maintenance operations in local and remote computers; the same way the DOS command line is used in Windows. See command line.
A Mac Terminal Window for Local Execution
This terminal window on the Mac presents the Unix command line. Note the Microsoft Windows XP.pvs file. PVS is a Parallels configuration file, and Windows XP is running in the Parallels virtual machine monitor in this Mac. See bash shell
Terminal Windows for Remote Execution
The two X Window "xterm" windows (top and bottom) display output from applications in two remote servers. They emulate input/output terminals and provide command lines for launching apps. (Screen shot courtesy of Peter Hermsen.)