It's used now as official term on AWS and probably other clouds as well. Its the new hot thing since you don't need to provision any servers or infrastructure. All you do is write code and deploy it to a cloud platform. And it's much much cheaper as well.
So yeah it's a dumb term but it's here to stay. :)
Cheaper? I have no idea what running a particular app would cost. The ridiculously fine grained way in which the big IaaS providers charge for their services is a major reason why I'm avoiding them whenever I can. It's just too risky, too complex and too brittle. Any tiny change can have huge cost implications.
From what I've read if you had a single instance of a lambda function running 24/7 it's still cheaper than the micro EC2 instance. You have warm-up time on initial requests if the functions been idle for awhile, but otherwise the response time is fairly quick <25ms and it scales up with your traffic directly. It's cheap for a web application served primarily from CDN with serverless for backend logic and easy entry to using other AWS services with secure access per function. Starting a web app through serverless would be insanely cheap barrier to entry with serverless considering you only pay for processing time.
Whether this works well depends largely on the architecture of the application and if it's done right. You can absolutely have a serverless application that would be much better served with elastic beanstalk or ECS perhaps but to say serverless is useless or too expensive all around is not true.
So yeah it's a dumb term but it's here to stay. :)