From Richard Nordquist,
Your Guide to Grammar & Composition.
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Definition:

Extending a metaphor through an entire speech or passage so that objects, persons, and actions in the text are equated with meanings that lie outside the text. The most famous allegory in English is John Bunyan's Pilgrim's Progress (1678), an allegory of Christian salvation represented by the varied experiences of its Everyman hero, Christian. Adjective: allegorical.

Etymology:

From the Greek, "to speak so as to imply something other"

Example:

"And now, I said, let me show in a figure how far our nature is enlightened or unenlightened: Behold! human beings living in an underground cave, which has a mouth open towards the light and reaching all along the cave; here they have been from their childhood, and have their legs and necks chained so that they cannot move, and can only see before them, being prevented by the chains from turning round their heads. Above and behind them a fire is blazing at a distance, and between the fire and the prisoners there is a raised way; and you will see, if you look, a low wall built along the way, like the screen which marionette players have in front of them, over which they show the puppets. . . . And now look again, and see what will naturally follow if the prisoners are released and disabused of their error. At first, when any of them is liberated and compelled suddenly to stand up and turn his neck round and walk and look towards the light, he will suffer sharp pains; the glare will distress him, and he will be unable to see the realities of which in his former state he had seen the shadows; and then conceive some one saying to him, that what he saw before was an illusion, but that now, when he is approaching nearer to being and his eye is turned towards more real existence, he has a clearer vision."
(Plato, from Book Seven of The Republic, "Allegory of the Cave")

Pronunciation: AL-eh-gor-ee

Also Known As: inversio, permutatio, false semblant