Short for multi-user dungeon, MUD is an online, text-based, virtual environment first created by Roy Trubshaw and Richard Bartle in 1978. MUDs became global in the MUD was known as MAD, which was created in 1984 and ran across BITNET (because it's time network). The picture is an example of Aardwolf, a more recent MUD that is still played on computers today.
Today, there are still hundreds of multi-user dungeons played through an Internet browser, connecting to another server, or by downloading software to your computer. A great site with hundreds of online MUDs is The MUD Connector.