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In terms of network latency this can be defined by the time it takes for a request to travel from the sender to the receiver and for the receiver to process that request. In other words, the round trip time from the browser to the server.
Well in a nutshell, latency is the time it takes for movements of your transmitter's sticks to be duplicated by the control surfaces on your model. The higher the latency, the longer they delay between you issuing a servo command such as full up elevator, and the elevator actually moving to the commanded position.