Latency is a time delay between the moment something is initiated, and the moment one of its effects begins or becomes detectable. When it comes to projectors, latency refers to the time difference between the computer screen and projection from the projector. There will always be some latency (time difference) between the source image (computer) and the displayed image (projector).

Laurence Muller has a Beamer Latency Measurement Tool v0.2 that will measure the latency of the projector. Ideally anything under 20ms is really good. For multitouch, if the latency of the projector is high, there will be visible lag between finger movement of objects and the projection of these objects.