The glossary activity module allows participants to create and maintain a list of definitions, like a dictionary.
Glossary can be used in many ways. The entries can be searched or browsed in different formats. A glossary can be a collaborative activity or be restricted to entries made by the teacher. Entries can be put in categories. The auto-linking feature will highlight any word in the course which is located in the glossary.

For information on how to set up a glossary please look at the video below

The wonderful Michelle Moore from Remote Learner gave a presentation at  MoodleMoot 2012 in Ireland where she highlighted the huge potential behind Glossaries

For more information on Glossaries please visit: http://docs.moodle.org/22/en/Glossary_module