This is only true for day-to-day words. However, legal words and technical terms need strict, stable definitions that are equally understood at least by all experts in that field. Otherwise, serious communication would become next to impossible, let alone serious discussions.
> For example, my dictionary states:
Dictionaries don't provide exact definitions. However, your quoted description seems to be the best you can get out of three lines. If you care to read 4-6 lines, you'll get the quite accurate FSF definition. If you care to read even 10+ lines, you'll get the detailed OSI definition.
> Indeed, this definition is more in line with what many people think when they hear "open source".
That's an important issue. Neither the term Free Software nor the term Open Source are completely self-explanatory. So people will inevitably have misconceptions about those if they've neither read a proper definition, nor had someone explaining it well enough to them.
The concrete issue with the term "Free Software" is that people might think: Oh, this software is free (no cost), so it must be Free Software. Eric S. Raymond and others tried to solve that problem by inventing a new synonym, "Open Source".
However, the term "Open Source" has issues as well, because people might think: Oh, the source code lies open in front of me, so it must be Open Source.
Note that this is a general problem. Hardly any technical term is totally self-evident to ordinary people. Just because a technical term is not self-explanatory doesn't mean you can simply ignore its exact definition.