General-purpose input/output; in this specific case, GPIO refers to the pins on the Raspberry Pi and what you can do with them. So called because you can use them for all sorts of purposes; most can be used as either inputs or outputs, depending on your program.
Light-emitting diode: a small, low-power light source used widely in electronics. Ideal as an introduction to physical computing on the Pi.
Computing that involves tangible things connected to a computer, beyond standard input and output devices like keyboards and monitors. Think buttons, lights, robots, alarms, sensors, home automation, teddy bears called Babbage in near space and so on. We love physical computing because as well as being lots of fun, it's such a powerful teaching and learning tool and encourages creativity, problem solving, and collaboration. Computing beyond the screen engages children of all ages, and you can make very cool stuff!