The application terms substitution is an administrative side configuration setting whereby you can replace a key term used in the application with an alias that is more familiar within your organization. You do this throught the Magick URL (No I didn't misspell that) and it should be noted that you must be very careful making changes in this admin side interface. The app terms are altered on the "Application Terms" tab. Also note, you can also change field labels in this screen on the "Object Metadata" tab.
I know what you're thinking... "where is this documented"... unfortunately like most things in ITBM it isn't. Hope this helps. Nathan