Organizations are abusing the word by using it to fuel their budgets,said.
Speaking at the Infosecurity Europe conference in London, the renowned author and cryptography expert called cyberterrorism a myth that has yet to become to a threat to human life.
"Nobody's getting blown to bits," Schneier said. "I don't think that cyberterrorism exists--if you add 'terrorism' to things, you get more budget. If you can't get e-mail for a day, you're not terrorized, you're inconvenienced."
"We should save 'terror' for the things that deserve it, not things that piss us off," he added.
Schneier said governments around the world, despite having teams of specialist hackers on hand, were not attacking each other. "I don't believe there is that much government hacking. That's just silly--adults don't do it. But we know that countries are spending money on military hacking organizations--Israel, China, (the United States) and everyone else."
The defacement of government Web sites is a small threat to governments, he said. "It's kids playing at politics. I don't think it's politically motivated."
Schneier added that the sophistication of worms and viruses will likely improve, as hackers develop reconnaissance viruses that are able to carry out vulnerability assessments and report back to the author.
Dan Ilett of ZDNet UK reported from London.