No one has replied to this??? And it's such a good question!!
Jam is a term from the late 1960's and early 70's. Michael is from that era. Simply, it means to let the music flow, to let it go ..... to let the musicians make it whatever it wants to be .... to lose restraints, and to allow creative energy to take control.
So, the idea is probably as old as the history of music
But sometimes, in live performances, jam can be planned or staged. So it isn't really "jam" because it's not spontaneous.
I'm sure that it can be explained more simply, or better. But does this help?