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Low latency allows human-unnoticeable delays between an input being processed and the corresponding output providing real time characteristics. This can be especially important for internet connections utilising services such as online gaming and VOIP - VOIP is not as important as a minor delay between input from each side of the conversation is generally blamed on non-technical issues.
However, online gaming demands low latency so as not to disadvantage players with low latencies due to highly varied ping times among fellow players - for this reason, game server applications generally favour players with lower latencies by determining the data relating to a player as known to the server, and allowing players to act on that, not the data as known by the fellow player's client.
See also
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