Step 1: Understanding the Concept
The question asks for the term for a belief system where spirits or souls are believed to inhabit not only living beings but also inanimate objects (like rocks, rivers, mountains) and natural phenomena (like thunder, wind).
Step 2: Evaluating the Options
(A) Monotheism: Belief in the existence of only one God.
(B) Polytheism: Belief in or worship of more than one god.
(C) Idolism: The worship of idols or physical images as representations of a deity.
(D) Animism: The belief that all objects, places, and creatures possess a distinct spiritual essence or soul. It comes from the Latin word 'anima', meaning breath, spirit, or life. This perfectly matches the description in the question.
Step 3: Final Answer
The belief system described is known as Animism. Therefore, option (D) is the correct answer.