Slippage is the difference between the price you expected to get and the price you actually got on a fill. If you wanted to buy at $50.00 and the average fill came in at $50.04, your slippage is 4 cents — and it gets multiplied by your share count on every trade.
Always negative on net. The market is not a random walk around your intended price — the price moves against you precisely because your order is part of the demand that moves it. Bigger orders move the book more; market orders eat through more levels of the book; illiquid names have wider bid-ask spreads to begin with.
Slippage compounds in ways that wreck backtests. A strategy that looks like 0.5R-per-trade expectancy on paper with $0.01 slippage assumed can drop to 0.2R or below once realistic $0.05 slippage is applied across 500 trades — turning a tradeable strategy into a losing one on real fills.
Practical mitigations: prefer limit orders over market orders, avoid trading the first and last 5 minutes of the session (worst slippage of the day), size down on illiquid names, and audit your actual slippage in the journal. Most traders dramatically underestimate their realized slippage until they compute it — and the number is one of the single highest-leverage things to know about your own execution.