In the book 'A course in mathematical logic' Manin defines terms as,
$Terms$ are the elements of the least subset of the expressions of the language which satisfies two conditions:
Variables and constants are (atomic)terms.
If $f$ is an operation of degree $r$ and $t_1,t_2,\dots,t_r$ are terms, then $f(t_1,\dots,t_r)$ is also a term.
What is the significance of 'The least subset' in the definition?
The "least subset" condition is typical of inductive definitions: it means that the defined set is the intersection of all sets containing:
(i) the "initial" elements; for $\text{Terms}$: variables and constants;
(ii) is closed with respect to new elements "generators": for $\text{Terms}$: the function symbols $f$.
The condition ensures that the set $\text{Terms}$ does not contain "unwanted" objects.
We can try a simple "mental experiment", considering the set $\text{Even}$ defined by:
(i) $2$ is in $\text{Even}$; and
(ii) if $n$ is in $\text{Even}$, then $n+2$ is in $\text{Even}$.
If we look at the set: $\{ 2,3,4,6,8,9 \ldots \}$ we can check that it satisfies the two conditions, but it is not what we want.
How can we rule out cases like this ?
Of course also $\{ 2,4,6,8 \ldots \}$ will satisfies the above condition; what is unique of the last one is that it is the intersection of all sets satisfying the conditions, i.e. it is the "least set" that satisfies them.
The general definition applies to all specific examples in Manin's text.
For $L_1Set$, we have as initial elements the variables plus one single constant: $\emptyset$ and no function symbols.
Thus, in this case: $\text{Terms} = \{ \emptyset,x,y,z, \ldots \}$.
For $L_1Ar$, we have two constants: $0$ and $1$ and two (binary) function symbols: $+$ and $\times$.
In this case $\text{Terms}$ is more complex: