"Anime" was actually ORIGINALLY meant to describe animation, but that used a particular number of frames per second, before becoming a term just for animations in general. Anime doesn't HAVE to be strictly Japanese, but some rules have to be followed for this (the same applies to "manga," the comic book version of anime).
If an anime is made in Japan (especially if the original language of creation is Japanese) then it is free to be called anime. Same goes for manga. However, if it has the same or a similar enough style to anime or manga but is made OUTSIDE of Japan (for a good example, see the Korean-made "March Story" series) then two actions could be taken; calling it either a "cartoon" or "graphic novel" depending on the medium, to differentiate it; OR, you may call it anime or manga, if the country or origin/main release is SPECIFIED (so March Story would be Korean Manga, and Avatar would be American Anime). This implies that it looks like anime, maybe even has similar themes or stereotypes as anime, or manga, but that it ISN'T because of the country of origin. This appeases everybody, and makes sense.
