Jailbreaking is the colloquial term
for hacking a device, typically an iPhone or iPad, to expand its capabilities
to its fullest potential. When Jailbreaking first started to become big, people
realized there needed to be a better way to distribute the hacks to make the
process easier.
As a result, the open source distribution system Cydia came
out. Cydia is generally the most popular of Jailbreaking software, just past
Installer.app. Cydia is also now how most people get the hacks and apps not on
regular iPhones.
So why is it named Cydia? The created, Jay Freeman, says that
he picked that name because of the worm cydia pomonella, which is often thought
of as the stereotypical apple worm.