Latency, the time it takes for data to return from the Server at the distant end
When computers ask for a file or webpage from a remote server, eg Stuff's server through stuff.co.nz, the delay for a reponse from Stuff's server is called Latency. Usually this time gets larger with greater distance, but sometimes it can be the Server causing delay. TrueNet tests every hour for Latency from sites in Australia, the USA, the United Kingdom as well as Wellington and Auckland.
Latency can impact gamers considerably, the typical problem being that the delay causes those with high latency to be shot before they see the shooter with a lower latency. Sometimes this delay can be considerable, especially on international links.
ISP's can influence the level of latency by choosing shorter links, avoiding sending packets over repeat routes (eg Wellington to Auckland and return) or peering (linking up with other local ISPs at a local interconnect point.)
Choosing an ISP with very low latency is critical for gamers, but also impacts anyone using Voice over IP (Skype or Internet telephones)
See ISP Performance here.