The term 'butterfly effect' itself is related to the work of Edward Lorenz, based in Chaos Theory and sensitive dependence on initial conditions.
The 'Butterfly Effect' is the propensity of a system to be sensitive to initial conditions. Such systems over time become unpredictable, this idea gave rise to the notion that a butterfly's wings might create tiny changes in the atmosphere that may ultimately alter the path of a tornado or delay, accelerate or even prevent the occurrence of a tornado in a certain location. The flapping wing represents a small change in the initial condition of the system, which causes a chain of events leading to large-scale alterations of events. Had the butterfly not flapped its wings, the trajectory of the system might have been vastly different.
A great example of this theory was produced in this 2004 movie, 'The Butterfly Effect,' starring Ashton Kutcher, Amy Smart, and Eric Stoltz.