A test similar to a UnitTest except that it tests the interactions between units.  See ShouldUnitTestsTestInteroperations.

''Is this something like a FunctionalTest?''

No, in that in ExtremeProgramming, the FunctionalTest is concerned with testing that the software does what the customer wants it to do, regardless of the specific structure of the code.  The SubsystemTest is like a UnitTest in that it is used primarily by the programmer to confirm that his code is working.  The difference is that it doesn't test a single class but a group of classes that work together.
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CategoryTesting