Chibi is a drawing style that renders characters super-deformed: very short bodies, oversized heads, and simplified features, for a cute or comic effect. It is used for reaction shots, parody segments, spin-offs, and an enormous share of anime merchandise.
Chibi began as ordinary Japanese for a small or short person, sometimes teasing, and fandom turned it into a drawing term. The chibi style compresses a character to about two or three heads tall, enlarging the head and eyes and simplifying everything else, and it is instantly legible at sticker size, which is why it dominates merchandise.
The style does tonal work. A scene redrawn in chibi is a scene in quotation marks: embarrassment, excitement, and petty rage all become comedy when the character shrinks. Series cut to chibi for reaction shots and side segments, and entire spin-offs run in the style, retelling a serious story as a plush comedy.
Chibi is also a merchandising language in its own right. Acrylic stands, keychains, and plush lines are drawn chibi-first, and fans collect the compressed versions of favourites as a separate shelf. The term names a style of depiction, not a kind of character: any character can be drawn chibi, and the word describes the drawing, never the person. The style has roots in older super-deformed art used in parody manga, and it migrated from the margins of magazines to the centre of the merchandise economy without losing its comic function.
In use"The key visual is dramatic; the keychain version, two heads tall and furious, is chibi."