This concept is much older than you’d think. It precedes psychology as a scientific field and is attributed to Adam Smith as per Wikipedia.
It is about our tendency to overestimate our happiness in the future based on some assumption. E.g., you think you’ll be the happiest man alive if you win the lottery, or more realistically, if you’ll ever make 2x your current salary. Then you get there, and nothing really changes besides a short boost.
In the context of a decision making process, an affective forecasting error occurs when we make a commitment for the future, because we assume it’ll be a better place than it actually turns out to be. A related concept is the Hot-Cold Empathy Gap.