Plain English Meaning
An instrument is not working properly and is showing wrong, stuck, or jumpy readings — or no reading at all.
Full Definition
A failure or abnormal operation of one or more flight instruments such that the displayed information is missing, frozen, erratic, or incorrect, leading the pilot to receive false or unreliable indications of aircraft state.
Context Anchor
Encountered during preflight checks, normal instrument scanning, and upset prevention and recovery training, especially when a bad indication could distract the pilot or lead to a wrong control input.
Derivation
From Latin malus (bad) and functio (performance). A malfunction is literally a 'bad performance' — the instrument is still operating, but not correctly. This is important because a malfunction can be more dangerous than a complete failure, since the pilot may not realize the indication is wrong.