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The word modulo was introduced into mathematics in the book Disquisitiones Arithmeticae by Carl Friedrich Gauss in 1801. That book introduced a number of new ideas, among them modular arithmetic.
But the word modulo is now used much more generally in mathematics.
Generally, to say
means, more-or-less,
That is, the up to concept is often talked about this way, using modulo as a term alerting the hearer. The use of the term in modular arithmetic is a special case of that usage, and that is how this more general usage evolved. The operation of "modding out by C" is that of identifying with each other any two things that are the same modulo C.
A long list of examples and the technical details need to be added here. The phrase "to mod out" should be explained.