A term created by psychologist Paul Meehl in the area of personality analysis. This describes the tendency for most people to accept a very generalized, non-descript interpretation of their own personality. Majority of people are also quicker to acknowledge a positive trait about themselves than a more negative aspect. This was mainly researched by using a mock personality test which asked the participants vague questions, yet all received the same analysis. The analysis was general and positively worded enough that most participants identified the description as accurately portraying themselves. This was first tested and studied in the 1940's by psychologist B.R. Forer.
The Barnum effect is more popular than most people realize, and is used on us and by us almost daily. A good way of seeing this phenomenon in effect is reading a horoscope. Most people read their horoscopes for fun, and some read it almost religiously. What they are actually reading is a very good generalization that is not only playing to people's private lives, but is also positive enough to keep them wanting to read to see if they have "good news" coming. In truth, if a Libra were to read the horoscope for an Aries, they'd find just as much "accuracy" in each. Similarly fortune tellers ask their clients just the right questions and make enough observations keen enough to analyze a client in such a general way that it feels personal.
The term itself refers to the circus showman P.T. Barnum, and is generated from Barnum's saying that a good circus has a little something for everybody.
Reference: G. Jahrke, Ph.D.