Crowdsourcing was a term first coined by Wired Magazine in '06. It's a combination of the words "crowd" and "outsourcing." Outsourcing often gets a negative wrap since it is most often associated with moving jobs to third world nations, but that's a specific type of outsourcing called "overseas outsourcing" or "outsourcing overseas".

Most companies use some sort of outsourcing in their development, undoubtedly the two most common types is the use of an accounting or legal firms. Rather than hire a lawyer or an accountant full time, a smaller company may employ these professionals only when they need them.

Crowdsourcing refers a specific type of outsourcing, that instead of hiring a single person or company to do a function, hires (or rewards) many, many people to accomplish the same thing.

However the primary motivation of crowdsourcing is not solely to save costs (and sometimes it increases costs).