The term dates from the late 1980s, and may have been coined by Maxis in order to help market the original SimCity, which did not fit the usual model of game play in order to reach a goal.
Flight simulator games fall into this category also; players often make up tasks, such as to fly from from one airport to another, or to fly under a bridge, but these are not designed into the program.
Software toys are perhaps the riskiest genre of computer game to develop; for instance, The Sims is a top-selling game although industry insiders were originally extremely doubtful about its prospects, while similar games like SimEarth and SimAnt were much admired but did not sell very well.