Minimizing the latency
The general definition of latency is the amount of time it takes any system to respond to whatever messages are sent to it. For example, if your system's latency is high and you play VST instruments in real time, you will get a noticeable delay between when you press a key and when you hear the sound of the VST instrument. Nowadays, most ASIO-compatible audio cards are capable of operating with very low latencies. Also, all VST applications are designed to compensate for latency during playback, making the playback timing tight.
However, the latency time of a VST System Link network is the total latency of all the ASIO cards in the system added together. Therefore it's extra important to minimize the latency times for each computer in the network.
The latency does not affect the synchronization - it's always perfectly in time. But, it can affect the time it takes to send and receive MIDI and audio signals, or make the system seem sluggish.
To adjust the latency of a system, you typically adjust the size of the buffers in the ASIO Control Panel - the lower the buffer size, the lower the latency. Generally speaking it's best to keep to fairly low latencies (buffer sizes) if your system can handle it - about 12 ms or less is usually a good idea.