The good news is, terroir has a beautiful, one-word definition: "somewhereness." Ok, so that's not a word, but it is the definition Shelby Ledgerwood gave and it is pretty perfect. Terroir is the combination of climate, soil and geographical features that creates a wine's unique aromatics. It's the environment in which the grapes were produced.
While grape varietal is the most important factor in determining how a wine smells and tastes, terroir, along with viticulture, winemaking and ageing, is also important. Not only that, it is the factor with the most variety and the least human control. Basically, grape varietal and terroir are nature, and viticulture, winemaking and ageing are nurture.
Different grape varietals require different types of terroirs to ripen properly. While the Great 8 (Pinot Gris/Grigio, Sauvignon Blanc, Chardonnay, Riesling, Pinot Noir, Merlot, Cabernet Sauvignon and Syrah/Shiraz) can grow in many locations, they still require certain specifications to thrive. Other grapes are even more particular about their required terroirs. But regardless, the same grape grown in different parts of the world will create wine that tastes different.
That's not only what makes terroir so special, but also useful in labeling wines. Every country has levels of classifying wines, from basic table wines on up. The highest level (and often the bulk of wines, because winemakers take pride in their work) are classified not using political boundaries, but terroir. Regions of particular terroirs are specified, then sub-regions within those, and finally, vineyards and estates within those. Generally, the more specific, the better, and each country has laws about what you need to do to get which level of specificity on your label. This is why France, the first country to have laws about wine production and labeling, doesn't always have the grape varietal on the bottle. Once you get to a certain level and get to define by specific regions, there are rules about which grapes are allowed in the bottle anyway. For example, a white Burgundy will almost always be a Chardonnay, as that is the chief white grape for that region. If the bottle says French Chardonnay, it doesn't mean it's bad, it just means it didn't meet classification-by-terroir-requirements. At the very top levels in France, you can even tell where on a specific slope in a particular vineyard the grapes grew! In the US, you might notice some wines say things like "California Champagne" while others specify a wine growing region like Napa Valley, or even a particular state. We've got rules, too, and while they're not so strict, the same thing goes for specificity: it's generally a good thing.
Ok, ok, whatever, how can I use this word in a sentence that will make others feel inferior? Terroir can affect wine in so many wines, it would be hard to make a wrong observation as long as you keep it vague. Whether it's a climate thing (ripe, fruit-forward wines probably got a lot of sunshine, maybe a late harvest, while thin-skinned grapes like Pinot Noir come from cooler climates), a fun fact about soil (gravel for Cabernet Sauvignon, clay and limestone for Merlot, and terra rosa, an iron-rich soil, for a boost in tannins), or geography (proximity to water and altitude make a difference), a brief observation can send you into charming speculation of the wine's heritage, and maybe, after another glass and a discussion of your own and how you got to be some damn clever.
Inside of a whale!