The term latency in network communications refers to the delay before a transfer of data begins following an instruction for its transfer. It represents how long it takes for data to travel from source to destination. Latency is influenced by several factors, including network congestion, distance between devices, and the nature of the transmission medium. High latency can negatively impact applications requiring real-time communication, such as video conferencing and online gaming. Reducing latency is crucial for improving overall network performance and user experience.