The meaning of the term could include concrete objects to passing mannerisms. At some point in people's lives it becomes something that everyone one pays attention to, as transient as it might be. It's something that's visible everyday and everywhere, and changes rapidly with the seasons.
Human beings generally desire novelty as well as conformity. These are social demands that fashion fulfill well. It makes a society-based practice of the need for newness, with many people participating in it. The rapid changes in what is perceived to be trendy is also indicative of the fact that people always seem to have need for things that are novel. It's clear that this phenomenon has valuable psychological functions as well.
At the same time its manifestation also satisfies the need to be distinctive, the desire to stand out from the crowd. Thus variety and novelty go hand in hand, two human desires that anything fashionable seems to sate. Anything from the latest shoes to cell phones or tastes in music are suitable as visible markers of uniqueness.
In a way it also helps to sate the need for conformity. Everyone conforms to the extent that everybody has some interest in what's new and trendy. It gives the sense that one is part of a larger whole, a necessary social-psychological mechanism to fortify against the sense of isolation from the rest of humanity.
It also has a role to play in facilitating cultural shifts between all manner of customs. It thus prevents socially-derived customs from being static, and underscores the importance of adaptability in beliefs, attitudes and behaviors. So in a sense it reflects on the surface a deeper resilience involving adaptation to changing circumstances, something important in the history of the survival of the human species.
It is also a mode of cultural influence. People with high and sought-after status like film and pop stars or admired artists are sometimes unwitting trendsetters when it comes to what's regarded as fashionable clothing or even eating habits. Even subcultures of every type adopt unique styles as a way of socially marking its distinctiveness and influence over its members.
Universally cultures divided by geographical and social space use fashion as a marker of difference and uniqueness. Through it a social group or nation communicates its rich history to the world. Even among the same social group there are usually a plethora of smaller groupings based along the lines of religion or ethnicity that express a sense of history and solidarity through this phenomenon. Thus despite its transitory surface appearance fashion represents enduring social and psychological qualities unique to humanity.