The term "API gateway" refers to a crucial component in software architecture that acts as an intermediary between clients and backend services, managing API requests. It handles various functions such as authentication, load balancing, monitoring, and routing requests to appropriate microservices. By consolidating these responsibilities, an API gateway simplifies client interactions and enhances security and performance across applications. This architecture promotes a more organized and scalable approach to building and maintaining software ecosystems, particularly in microservices environments.