Stems are used in music and film.
For international films, you want music/effects/dialogue separate in delivery, so you can dub in foreign languages.
For music remixes, you might get the beds broken out in stems (bass, drums, guitars, fx) and lead elements separate (vocals, lead guitars or tuba, etc.). It makes it easier to remix w/o going back to the mix. Many times you won't have any effects printed (or maybe on a separate track(s) so the remixer can do their own thing.
The term has been expanded to include (mostly) analog mixing, esp. summing mixing. Since analog hardware is usually limited in comparision to software, a mixer will use soft plugs on many individual instruments/tracks, bus those to stems, which are then treated w/ the hardware units in analog. Guitar bus/stem, vocal, drums, etc. Some engineers will do low/med/hi frequency stems so they can treat those elements of a mix, rather than traditional bus elements.
Stem is short for something branched off - think of an upside down tree. Leaves are tracks, branches are stems (or buses), and the final mix is the trunk. If is a general, nebulous term that everybody in a project is hopefully using the same.
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