Terminal app was made by upstream Android for running desktop/server Linux distributions in a VM with a console UI, but they're adding GUI support and the app will likely get renamed and overhauled with GUI apps as the focus.
They're testing without GPU acceleration enabled. Note the Terminal app is not yet compatible with a VPN and is only for Debian at the moment.
This is why you may find it listed as part of the system but it requires enabling developer options, toggling it on there and then disabling developer options for it to be exposed and appear in the app drawer.