A Terminal Disclaimer is a written statement by a patent owner stating that the owner has disclaimed, or renounced legal claim to, a period of a later-issued patent that would extend beyond the expiration of an earlier-issued patent. The terminal disclaimer avoids one type of double patenting rejection as long as both the patents are commonly owned.
There are two types of double patenting rejections.
First, there is statutory double patenting (covered under 35 USC 101), which is trying to get a patent for an identical invention to that claimed in another patent. It is not allowed under 35 USC 101.
Second, there is non-statutory (or obviousness type) double patenting, which is trying to get a patent that, while not identical, would be obvious in view of another patent. This type of double patenting is judicially created, and can be overcome by filing a terminal disclaimer.
The idea behind the terminal disclaimer is to prevent a patent owner from effectively extending the life of a patent by filing multiple applications with claims only differing a little from the first one.