Why Is the Loss Termed “Impermanent” If the Token Ratio Is Permanently Changed by Arbitrage?

The loss is termed "impermanent" because the loss is only a paper loss relative to the value of holding the initial assets. The loss only becomes permanent or "realized" when the liquidity provider withdraws their assets.

If the prices of the two tokens were to return to the exact ratio they had at the time of deposit, the pool's composition would also return to the initial ratio, and the impermanent loss would theoretically vanish before withdrawal.