Pronounced, "ledding" (not leeding). The space between lines of type. When setting type by hand thin strips of lead could be placed between the lines of type when making up the typeblock, opening up space between the lines. Type without lead was said to be "set solid".

With mechanical composition, it was generally easier to cast, for example, 12pt type on a 13pt body. This had the same effect as leading, opening up some extra space between the lines. Hence the common terminology e.g: 12 on 13pt (or 12 x 13), persists. Note that in hand composition this would be equivalent to adding 1pt leads between lines, not 13pt leads!

With photographic and digital composition there is no lead in the type, and no lead between the type, but the expression "leading", generally used loosely for "spacing between baselines", has stuck.

Appropriate leading is a matter of judgment, and partly of personal preference and the prevailing fashion for leading of the times. Typographers generally agree (1) that type of a given nominal size which has a relatively small x-height "requires" less leading than type with a large x-height.

(1) because the perceived gap between the lines of type is larger anyway.
(2) long lines of type require extra leading to prevent doubling and line skip
(3) other aspects of the design of the type (e.g: very condensed or expanded type) may require extra leading.

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