Hi Parimala, that's an innocent question to ask. When you are in HR, you can sometimes be bombarded with the ever-evolving terminologies and the processes associated with them. Keeping updated with them is a task on its own. For example, there was Recruitment only, then came Recruitment and Selection, then Recruitment and Placements, followed by Hiring Processes. Eventually, they substituted all that for Talent Acquisition, which is the operating terminology now. It really doesn't matter, as you can always be curious and keep doing the necessary research by asking yourself how they came to form/exist in the first place.
Siva has answered your initial query on why it's called so and what the process is. Staying curious further, you might find yourself asking basic questions that may lead to additional revelations like...
Understanding the Appraisal Process
Primarily, at the base of any appraisal process is who? Employee and Organization. An employee's primary relationship to his organization is through his work contract. The work contract's relationship to the organization is the role. The role's relationship to the organization is the job profile + competencies. The job profile + competency's relationship to the organization is the Department and its goals. The Department goals' relationship to the organization is Business or Organization goals.
Now, as you see, I don't need to go any further. You, being an MBA, can make sense of those words, can you not? So, Appraisal Processes generally attempt to first establish the relationship of the role to the organization. And as you realize, it has many relationships that allow you to measure or come up with a framework to assess an employee's performance against organizational goals.
Simply put, 360 Feedback/Appraisal processes (is just one out of many) attempt to capture the working relationship of an employee in his job/work role and the other roles connected to him - bottom-up, up-down, sideways, laterally, and externally. The real challenge is when you have employees connected to task teams. That's not your headache now.
Hope that rests all your doubts about the Appraisal Systems in HR, including why they call it 360.
Best wishes,
Erstine