Foo is a "metasyntactic variable", an inherently meaningless word which serves as a placeholder when the true word is variable, or is determined at the player's discretion.
For example, a certain skill title might be "Foo porcupine", where "Foo" will be replaced, in game, by the character's species. "Fooweight champion" will assign a weight class (lightweight, heavyweight, etc.), again depending on the character's species.
Although the word's history is long, most players might be most familiar with it from discussions on other Roguelikes, including NetHack.