The term agile methodology in software development refers to an iterative and incremental approach that emphasizes flexibility, collaboration, and customer feedback. Agile encourages adaptive planning and promotes the delivery of functional software in smaller increments, allowing for quicker adjustments based on changing requirements. It often involves practices such as sprint planning, daily stand-ups, and retrospectives, fostering team communication and stakeholder involvement. This approach helps manage complexity and enhances product quality through continuous testing and improvement.