The term "horizontal scaling" in cloud applications refers to the ability to increase capacity by adding more instances of computing resources rather than upgrading existing ones. This approach improves performance and availability without significant downtime, as new instances can be deployed quickly. Horizontal scaling is essential for applications that experience variable workloads, as it ensures that resources can expand or contract in accordance with user demand. This flexibility is crucial in cloud computing, allowing businesses to optimize costs and resources while maintaining high service levels.