The term 'illī' is a demonstrative pronoun in Latin that means 'those' and is used to refer to people or things that are farther away from the speaker. It serves as an important element in distinguishing between different types of demonstrative pronouns, particularly in terms of proximity and number. 'Illī' can convey nuances about which noun is being referenced based on its case, gender, and number, and it plays a key role in constructing clear and effective sentences.