Definition
Prices move between the moment you click and the moment your trade runs, and large trades move the price themselves. That gap is slippage.
Slippage tolerance
Wallets and trading tools let you set a maximum, such as 1% or 5%. If the price moves further than that, the swap fails instead of filling at a worse price.
Why it matters
A tolerance that is too low makes swaps fail on fast-moving or thin pools. One that is too high lets you fill at a much worse price. See slippage tolerance exceeded: fix.