How to respond to intentional lack of citation?
I don't know the details of your case, but in any case like this I tend to liberally apply Hanlon's Razor:


  Never attribute to malice that which is adequately explained by stupidity.


It does sound as if they know about your paper, but it seems to me entirely possible that they could have intended to cite it and accidentally omitted to actually do so.  I think you can contact them tactfully and point out that the original source for the technical term is your paper (give the complete reference).  They will probably reply with an apology for the oversight.  

If you want to be even more circumspect, you could ask a colleague in your subfield to contact them. ("I saw your preprint and it looks interesting.  The paper of Anonymous looks very relevant.  Do you think you should cite it?")

I've been guilty of such an accident myself.  I use BiBTeX to manage citations. I have a large file containing an entry for every paper I've ever considered citing.  Then for each paper I write, I include inline citations where they belong, and BiBTeX automatically picks the papers I've cited and generates the list of references.  In the case in question, I wanted to cite paper X in two places: in the introduction (as background) and in a specific technical passage.  I neglected to cite it in the introduction, but since it was also cited in the technical passage, paper X still appeared in the list of references, so when I saw it there I thought to myself "Good, I remembered to cite X."  Then in a later edit I changed the technical passage in such a way that X was no longer directly relevant there, so I removed that citation, thinking it was also cited elsewhere in the paper.  It wasn't, so BiBTeX accordingly removed it from the list of references, and it might certainly have looked to anyone as though I had intentionally failed to cite X (which was a well-known paper and clearly relevant).  The omission made it into a public preprint and was pointed out by a colleague (though not the author of paper X; he is long deceased), fortunately before the paper was submitted.

It was clearly my responsibility to have caught this and cited X correctly, and technical issues do not excuse my failure to do so, but I mention this as a specific example where such an error was due to stupidity rather than malice, and as evidence that the former could be an adequate explanation.