This might be what is meant here, as in a disease that has no known cure.

As an alternative to Bill's suggestion. I would interpret "terminal illness" as one which is expected ultimately to lead to the death of the patient, i.e. it is incurable and serious enough to cause death. I would interpret "fatal illness" slightly differently - an illness capable of killing the patient but possibly one for which curative measures are possible. So it all depends on what fits the context best and what diseases they are thinking of.
This is just what I feel and has no scientific base! You do hear of diseases which "can prove fatal" or which have an "n% fatality rate". Hope this helps.