It refers to the lambda calculus which is a formal system that just has lambda expressions, which represents a function that takes a function for its sole argument and returns a function. All functions in the lambda calculus are of that type, i.e., λ : λ → λ.
Lisp used the lambda concept to name its anonymous function literals. This lambda represents a function that takes two arguments, x and y, and returns their product:
(lambda (x y) (* x y))
It can be applied in-line like this (evaluates to 50):
((lambda (x y) (* x y)) 5 10)
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