A terrace is a paved or brick outdoor area right next to a house or apartment. You might have a nice dinner out on your terrace, enjoying the sunset.
Terrace and patio are synonyms. Another meaning for terrace is "a block of row houses that are connected by shared walls and are built in a similar style." Terrace also refers to flat areas on a hillside where people farm or have built houses. That land has been terraced, meaning "made into shelves."