The term 'algorithm bias' signifies the presence of systematic and unfair discrimination in AI models. This bias can arise from biased training data, where historical inequalities are reflected, or from flawed assumptions made during algorithm design. Algorithm bias poses significant ethical challenges, potentially leading to discrimination against certain groups in applications like hiring or law enforcement. Addressing algorithm bias is essential to develop fair and equitable AI systems, necessitating ongoing attention to transparency, diversity, and responsibility in AI development processes.