The word was first coined by Jeff Howe in a June 2006 Wired magazine article.
Wiki : Crowd sourcing is a neologism for the act of taking a task traditionally performed by an employee or contractor, and outsourcing it to an undefined, generally large group of people, in the form of an open call. For example, the public may be invited to develop a new technology, carry out a design task, refine an algorithm or help capture, systematize or analyze large amounts of data (see also citizen science).
The term has become popular with business authors and journalists as shorthand for the trend of leveraging the mass collaboration enabled by Web 2.0 technologies to achieve business goals.
Recently read "The Long Tail " by Chris Anderson . It is a must read for anyone who wants to understand the future of business. The book gives a very interesting perspective on : what happens when there is almost unlimited choice? It also shows why online models Amazon, Ebay etc are so successful by adhering to the 'rules' of long tail.
The future of business does not lies in 'hits' but in 'misses' ( the endless long tail). He refers to the concept of 'crowd-sourcing' quite liberally. Some examples of crowdsourcing that come to my mind...Wikipedia , InnoCentive, Threadless , Amazon , Netflix etc