What is the difference between "this" and "that"? How do I use these words in a correct fashion?
In writing, if I want to refer something (a concept, for example) mentioned in the last sentence, should I use "this" or "that"?

For example, what is the correct statement: the first one, the second or both?:

1 - Globalization (or globalisation) describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. THIS term is sometimes used to refer specifically to economic globalization.

2 - Globalization (or globalisation) describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. THAT term is sometimes used to refer specifically to economic globalization.

Question

What is the difference between "this" and "that"? How do I use these words in a correct fashion?
In writing, if I want to refer something (a concept, for example) mentioned in the last sentence, should I use "this" or "that"?

For example, what is the correct statement: the first one, the second or both?:

1 - Globalization (or globalisation) describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. THIS term is sometimes used to refer specifically to economic globalization.

2 - Globalization (or globalisation) describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. THAT term is sometimes used to refer specifically to economic globalization.

Answer

In the example that you have given 'this' is correct. It is referring to something (a term) that you are discussing. If you then referred to a another term, you would refer to it as 'that' term. 

It is not simply a matter of position as with 'este' and 'esse'. 

Look at this example: 

There are two books next to each other on a table. Rui says, "I like this one" - pointing to one of the books. Tiago says "I prefer that one" - pointing to the other one. 

So, this and that are not very different. It can simply mean 'this first thing' and 'that other thing'. 

Of course 'that' is also used to refer to things that are further away as with 'esse' and 'aquele'. But it not as clear cut.

If I say "I like this city" I am referring to the city that I am in. 

I can say "that city" if I am referring to some other city

Answer

this is mainly used to point to the things that are in a close range eg:
this is a good book . (the book is in your hands)
as for that it is used to point to things that are in a far range  eg:
that cat is cute . (u can see it but its far away )