Fungibility is the degree to which all instances of a given commodity are considered interchangeable.
For example gold is often said to be fungible. This means that one gram of gold is equivalent to any other gram of gold. There is no qualitative difference between one example of the commodity and another. Wool on the other hand is less fungible. One bale of wool is not necessarily qualitatively equivalent to another bale of wool. In discussions about the characteristics of money the term often refers to qualitative equivalence with regards to market value. So one gram of gold is worth as much as any other gram of gold while the value of wool bales varies due to differences in quality.
In finance, fungibility refers to the ability of one security to be easily converted into another related security. For instance, stocks are often listed on several stock exchanges, and a fungible stock would allow you to exchange the shares purchased on one exchange for shares on another. Not all securities are fungible in this way, but those that are somewhat more liquid and protected from volatility on one particular exchange.
In international relations, the term fungibility is usually applied to the power of states. International relations theorists who believe that power is fungible see different types of power as reinforcing each other. For example, if power is fungible, then a state can translate its economic power into military power, and vice versa. A major debate in international relations is the degree of fungibility between hard power and soft power.
In Does God Play Dice? The New Mathematics of Chaos, the mathematician Ian Stewart argues that fungibility applies to science as well. The example he uses is that subatomic particle theory is fungible when studying molecules "provided it led to the same general feature of a replicable molecule."