"Wabi sabi" is a not a commonly used (or known) term in contemporary Japan, although it has been popularised in western art circles to exemplify a Japanese art. A more used term in Japan (as far as I have been told - I am not Japanese myself) which has a related meaning is 'mono no aware' ( http://en.wikipedia.org/wiki/Mono_no_aware ).
[edit] to plug a book on Japanese culture (as it was, rather than as it is now) to anyone with the time or interest, I highly recommend Bernard Rudofsky's 1965 book 'The Kimono Mind'.
Mild disagree on your first sentence: It has featured prominently in several TV profiles of local artists, including in self-aware commentary by artists about the aesthetic values they are aiming for. It's entirely possible that a Japanese person might not be familiar with it, in the same manner that baroque might be a baroque reference to many Americans, but my impression is that it is well within the realm of 常識. My wife (Japanese) was surprised when I asked her to confirm that.
I do agree that it gets thrown about as The Essential Guide To The Monolithic Japanese Art Tradition quite frequently on the other side of the Pacific, though. (Those are sarcasm caps.)
[edit] to plug a book on Japanese culture (as it was, rather than as it is now) to anyone with the time or interest, I highly recommend Bernard Rudofsky's 1965 book 'The Kimono Mind'.