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The word feudalism characterizes a form of government and class hierarchy that has land-owning nobles providing military and financial power as well as various resources to a higher noble or to a monarch in exchange for protection, while requiring service from the knights and peasants within their domain.
People did not use the term "feudalism" in the Middle Ages, but during the French Revolution of 1789 to 1792 the word came into use in the modern sense of a group of peasants working the land for their lords and masters.
How the system worked
The traditional feudal system was most common in Europe from the 9th to the 14th century CE. Kings in the early period were, by and large, warriors who had stolen land from other warriors. To maintain the land, they would provide a fief to any warrior willing to support the king in his ongoing battles. Those lands were further broken down into knighthoods, each knight being duty-bound to the king. In some areas of Europe, the land was plotted and leased for individual serf homes, though the leases were generally so exorbitant that no serf would ever be free of his indebtedness to the landowner. Serfs were never considered to "own" the land. The last vestiges of feudalism in western Europe were thankfully swept away by reforms instituted in the wake of the French Revolution.
Non-European use of term
Pre-modern Japan is often analogized as a "feudal society", to show some of the similarities with the European Middle Ages, but the correlation is illustrative at best and fails to really describe what the true situation in Japan was.
Scholars have said that Ancient Egypt also had a feudal-like system in society, though the true obligation was one of religious duty as the King in any Egyptian society was bound to the people through his role as "God" of the people.
While feudalism faded out of use in Europe during the late Middle Ages, similar systems in other countries survived much later. The Russian emancipation of the serfs took place in 1861, and Japan's hierarchy of farmers, samurai and daimyo (lords) under the ruling Shogun was abolished after the Meiji Restoration of 1867.
Individuals in mainland China generally adopt the Marxist use of the term and refer to all Chinese history pre-communism as "feudalism", even though European-style feudalism was largely over in China by the Qin dynasty, which began ca. 221 BCE.