aka l10n .
In software, localization is the process of making a program able to adapt to local conventions of sorting (??), commification (I guess that's what you would call selecting the character used when marking off orders of magnitudes of numbers ... i.e. 1,000,000 versus 1.000.000), and other issues.
Also, translation of all GUI texts to the local, or selected, language (see msgcat).
DKF - Perhaps it is easier to put it like this: Localization is the process of taking a program (typically one that has undergone the process of internationalization) and adapting it to the particular situation in which it is found (generally called the locale.) This includes things like showing the right strings to the user, handling numbers, dates and monetary values correctly, doing the right thing when comparing two strings, etc.