Short answer: Latency is the time a packet takes to travel to a server and back, measured in milliseconds. It is driven mainly by distance: light in fibre covers about 200 km per millisecond, so every 1,000 km between you and your VPS adds at least 10 ms of round-trip time.
Latency explained
Real routes are longer than straight lines and add switching delays, so practical round-trip times are higher: 20–40 ms within a continent, 70–90 ms across the Atlantic, 150–200 ms from Europe to Singapore.
Latency matters for interactive workloads: games, trading, remote desktop, voice and APIs. It is the main reason to choose a data-center city close to your users, or to your broker's servers for trading.
See it in the data
Frequently asked questions
How do I get lower latency on a VPS?
Pick a data center in the same city or region as your users, or as the service your server talks to most.