(Video clip for those who don't get the reference.)
The term War Room is attributed to Winston Churchill, used to describe the underground meeting room where the war effort was directed. It is the "crucial meeting room where important decisions are made" sense of the term that is used at Microsoft.
Many software products (or even just components of software products) have a meeting room designated as its War Room. Depending on the stage of the project, War Meetings might be held weekly, daily, or even several times a day. The meeting is run by the War Team, with representatives from all product components in attendance. Progress reports are given, the schedule is managed, critical bugs (or, if things are coming down to the wire, all bugs) are reviewed. For projects that are spread out over multiple locations, fancy teleconferencing equipment may be installed, and there may be clocks on the walls for time zones around the world.
Since the same people tend to attend these meetings over and over, there's a good chance that you'll find long-standing inside jokes and other rituals. For example, in the Windows War Room, there are pieces of paper on the walls with various catch phrases printed on them. I have no idea what they mean, but they are obviously a source of amusement for the people who spend hour after hour in the War Room.
If you're a programmer or tester, you don't have much direct interaction with the War Meetings unless you are responsible for a bug that has caught the attention of the War Team, at which point you are suddenly thrust into the frenzy. Before each War Meeting, your manager will want a status report, and if it's a new bug, you may even have to explain the situation in person. For example, suppose the project is in its final days, and a new bug just turned up. You may be called upon to describe the bug to the War Team, assess how risky the fix is and its impact on performance, application compatibility, and all that other information that the release management team will need to know in order to decide whether they are going to approve the fix. (Another phrase you may hear is taking a bug to War, which means bringing the bug before the War Team to request that they approve the fix for the product.)
And now that you've learned all this vocabulary surrounding the term War Room, you have to forget it all, because the new term is Ship Room, since that is the room where decisions about shipping the product are made. (Though it seems that the security folks still call their meeting room the War Room.)
Aside: The White House War Room was renamed the Situation Room in 1961.
I don't know the reason for sure, but I suspect the old term is deprecated because it sounds too belligerent and uncooperative.
(And happy Veteran's Day.)
Bonus track: Inside the SQL 2008 Ship room. And no, the music is not part of the meeting.