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The term 'Lambda' derives from Lambda calculus, which is a formal system in mathematical logic and computer science for expressing computation based on function abstraction and application. Created by mathematician Alonzo Church in the 1930s, Lambda calculus provides a framework for defining functions and their applications. It uses variable binding and substitution to represent function definitions and calls, and it serves as a foundation for functional programming languages, influencing modern programming concepts.

In the context of computing, Lambda calculus is integral in understanding the theories of computation and the design of programming languages, making it a crucial concept in both mathematics and computer science. Its significance is reflected in various technologies and languages that utilize functional programming paradigms, like Python, JavaScript, and Scala, where the concept of anonymous functions, often referred to as "lambdas," is prevalent.