Pagan literally means "country dweller." In the West it has come to refer to those mostly Western, pre-Christian civilizations (Greeks, Romans, Egyptians) where the worship of multiple Gods and other non-Christian religious elements were practiced. Such traditions are also known as "polytheistic."
Another way of describing what paganism has come to mean is to define it as a non-Abrahamic religion (Islam, Christianity and Judaism being Abrahamic). However, one does not usually hear Buddhism or Hinduism described as "pagan," or not in popular parlance anyway.
Another term, a more pejorative one, would be "infidel," though that has fallen out of favor in the West, probably because of its somewhat politically incorrect, judgment-oriented resonances.
"Pagan" and "paganism" are apparently Western terms; so they have evolved anyway. Wikipedia tells us that, "Elsewhere, Hellene or gentile (ethnikos) remained the word for 'pagan' and paganos continued as a purely secular term, with overtones of the inferior and the commonplace."
Paganism is not considered a term of art by ethnologists who prefer to characterize historic faiths in more descriptive ways. "Polytheism" or "animism" would be two such descriptive terms.
Paganism as it is commonly referred to in the West has become more popular of late given the rise of various non-Christian religious traditions in the West, especially in Britain and the US. Wicca (witchcraft) has become more popular in the US; Druid worship is gaining ground in England. These would be known (popularly, in the West) as Pagan religions.