"First Nations" is a term used mainly in Canada
(but gaining popularity in the US) to refer to groups otherwise known as "Indian
s," "American Indian
s," or "Native American
The term was born out of the successful land claim negotiations and associated cultural renaissance experienced by Canadian First Nations (especially in the Yukon) in the 1980s.
As for why many wanted the term, here's one example: The Dawson Indian Band, a Han group of Athapaskan people named because of their proximity to Dawson City (which was named after George Dawson of the Geological Survey of Canada) recently changed the name of their group. They are now the Tron'dek Hwech'in ("people of the hammer water") First Nation. Their name is a Han language reference to the fishing of spawning salmon in the Yukon and Klondike Rivers, and is much more appropriate and relevant for them.
Others disagree with the term. While no one is seriously arguing in favor of the term "Indian" anymore (forget political correctness, the word is just plain inaccurate), some point out that the concept of "nation" is European, and it is strange (and just as inaccurate) to apply it to a band and family oriented society.
Many groups, especially in the US, still prefer the term "Native American."
"Specificity in language use does not constitute political correctness, but instead demonstrates an awareness of
the appropriate use of and sensitivity to language."
--Kathryn Lehman, University of Auckland