A computer program that generates textual narrative in response to user input, generally in the form of simple natural-language commands (e.g. "take keys" or "headmaster, tell me about Malcolm"). Following instructions encoded by the designer, a computer sends typed input through a parser to identify its grammatical structure, then respond by describing, in a few lines or paragraphs, whether or to what extent the game world has changed in response to the action requested by the player. The game might also announce that the input was not understood, or ask the player for additional clarifying input.
In chapter 1 of Twisty Little Passages, Nick Montfort writes that the term "was apparently coined by Robert Lafore and popularized by Scott Adams of Adventure International more than 20 years ago... and was then used widely by Infocom to designate their canonical works." (See Lafore, 2002.) The term has been used more generally in some academic writing, to include literary hypertext and other sorts of computer games and digital art.
Related articles: Eric on Interactive Fiction.