A terry stop is another name for stop and frisk; the name was generated from the U.S Supreme Court case Terry v. Ohio. When a police officer has a reasonable suspicion that an individual is armed, engaged, or about to be engaged, in criminal conduct, the officer may briefly stop and detain an individual for a pat-down search of outer clothing. A Terry stop is a seizure within the meaning of Fourth Amendment.
In a traffic stop setting, the Terry condition of a lawful investigatory stop is met whenever it is lawful for the police to detain an automobile and its occupants pending inquiry into a vehicular violation. The police do not need to believe that any occupant of the vehicle is involved in criminal activity.
In a recent case, Floyd v. City of New York 813 F. Supp.2d 417 (2011), the court held the New York stop-and-frisk policy violated the Fourth Amendment because it rendered stop and frisks more frequent for blacks and Hispanics.
Terry v. Ohio: http://www.law.cornell.edu/supremecourt/text/392/1