What does 'Latency' refer to in data transmission?

Latency in data transmission is defined as the amount of time it takes for data to travel from one point to another in a network. It is a critical measure in understanding network performance, as it directly impacts the speed at which data is transmitted and received. Lower latency indicates that data can be sent and received more swiftly, which is particularly important for real-time applications such as video conferencing, online gaming, and financial trading, where immediate feedback is necessary.

The other aspects mentioned in the options highlight different elements of network performance but do not capture the essence of latency. For instance, the cost associated with sending data pertains more to economic factors rather than transmission speed. Bandwidth refers to the maximum rate at which data can be transferred over a connection, reflecting capacity rather than time. Lastly, the capacity of data that can be processed speaks to the amount of data that systems can handle but does not relate to the timing of data transmission. Understanding latency helps in diagnosing network issues and improving overall data transmission efficiency.