It's not a super descriptive term for sure, but I have no idea what it would be called otherwise. It's similar to things like Metroidvanias or Soulslikes in that it's a very specific niche without a clear delineation of what it is, but fans will know it when they see it
You can argue half life, but Deus Ex and Thief are the quintessential "immersive sim" forbearers (along with system shock 2). When they say sim, they mean the game reacts to play action in ways that aren't predetermined or scripted. The idea is they value player agency and their impact in the game world over pre-set events