Inflation is by definition, "a general increase in prices and fall in the purchasing value of money" (Google Dictionary). On Civilization Wars, it refers to the fall in the value of currency and the effect it has had on the server economy. Inflation is the opposition of deflation.
To further explain inflation, let's break it down. Imagine a miner who sells diamonds. She sells diamonds for $250 each. After 3 months of a good business, the value of the currency drops, due to numerous factors (explained later). Due to this, she needs to raise her diamond prices to adjust to the rising cost of producing the diamonds, including mining equipment bought, cost of running her store, and other factors. Meanwhile, almost everywhere else, other merchants are doing the same thing. Inflation is a general increase in the cost of prices, so if, for example, her diamond supplies are getting low and she has a high demand (supply/demand) and then raises the prices, it is not inflation.
Evidence of Inflation Edit
In mid-summer 2013, $0.18 was worth about $1.00 today (December 2014). According to G, the general value of currency has been gradually rising ever since at a steady pace. It is important to note that, for example, the sudden rise or decrease of a commodity, such as diamond prices rising and iron ingot prices dropping is not an example of inflation, but of rise/demand. More information can be seen here.