Jim Rutt defines 'open source' as a philosophy and practice in software development where the source code is made publicly accessible, allowing anyone to inspect, modify, and enhance it. He emphasizes that open source fosters collaboration and innovation by encouraging a community-driven approach, where developers from across the globe can contribute to a project, share improvements, and fix bugs. Rutt notes that this openness not only democratizes technology but also accelerates the pace of development and problem-solving. He believes that the transparency and peer review inherent in open source lead to more secure, reliable, and adaptable software solutions, benefiting both individual developers and organizations.