Definition:
Feature-driven development (FDD) is a customer-centric software development methodology known for short iterations and frequent releases. Like Scrum, FDD requires the customer, also known as the project business owner, to attend the initial design meeting and iteration retrospectives.
By releasing new features in an incremental fashion, developers are able to prioritize client requests, respond to requests in a timely manner and keep clients satisfied. In order to achieve this, developers map out what features they are capable of creating, break complex requests into a series of smaller feature sets and and then create a plan for how to complete each goal over time.
Further Reading:
Book: UML Distilled Third Edition by Martin Fowler