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Though many people mistakenly use the term penultimate to mean ultimate or greater than ultimate, it actually means second to last or next to last. Thus it is not the ultimate, but the next to ultimate. For instance, the second to last chapter in a book would be the penultimate chapter, or the second to last book in a series of books would the penultimate volume. The term is also used as a specialized term in linguistics to refer to the second to last syllable in a word.
The term penultimate is used in linguistics and in grammar books to refer to a particular syllable in a word: the penult or penultima. This is the second to last syllable in any word, such as "la" in "syllable". This comes in contrast to the antepenult, which is the syllable before the penult, and the ultima, which is the last syllable of any word. Using the word "syllable" as an example again, "sy" would be the antepenult, "la" would be the penult, and "ble" would be the ultima. Linguists often use these terms to point out where the stress should be on a word; for example, in American English the word "revelation" is stressed on the penultimate syllable.
In broader usage
Penultimate isn't just limited to grammar use though. It can be used to refer to anything that's the second-to-last in a series, like the second to last child in a family, the second to last passenger car on a train, or the second to last box of cereal left on a grocery store shelf. It can even be used to describe this paragraph, the second to last one in this article. The terms antepenult and ultima can also be used in daily life, but "ultimate" is more commonly used than "antepenultimate"
Often used incorrectly
Misuse of the word is extremely common, with people tending to use it to refer to something that's extremely great or far beyond ultimate. Some businesses even use the term penultimate in their advertising to make a product sound like it's even better than the ultimate version of the product, but this is a mistake.