Why does "Terminal" retain focus / stay in the foreground when I open other apps, and how do I prevent or change that?

Not sure when this was added, but there's a new item under the Terminal menu called "Secure Keyboard Entry" which has this non-hand-off as a side-effect. Turn it off and Terminal behaves as it always used to. Hopefully they can figure out a way to allow for both things at once at some point.

Quit Terminal. In a Finder window, drag (move) the Terminal .plist (/Users/username/Library/Preferences/com.apple.Terminal.plist) to your Desktop. When you launch Terminal again, it will take its defaults and newly launched applications will appear over the Terminal application. This is what I did to solve the issue on macOS 12.2 on a 2021 16-in M1 Pro.

I am now reviewing that .plist in Xcode to determine what specifically caused the foreground annoyance.

Try booting into Safe Mode and see what happens.

unruly83 wrote:

When I have "Terminal" in the foreground and open another application, the new application opens in the background (rather than the foreground).

This is rather annoying, as I always need to Cmd+Tab to the application after opening it.

This is not limited to the "open" command in Terminal - it also is occurring when I click the icon in the dock to open the application, or open the application using Spotlight (Cmd+Space).

Why is this happening, and how do I change it so that applications open in the foreground and context switches from Terminal to the newly opened application?

Note: this is a relatively new Mac running OS 12.2 and my colleagues are experiencing the same issue with their new Macs.

ref: https://support.apple.com/guide/terminal/use-secure-keyboard-entry-trml109/mac

What other similarities are there between your Macs (primarily software, especially system modifications).

I don't see that problem at all.