As topics regarding latency in Cubase pop up regularly and especially the terminology can be a confusing topic for new users, this is intended to be a little introduction to the topic.
Is latency a problem for me?
If you only record audio tracks and don’t monitor through a plugin (e.g. a guitar amp simulation), you don’t need to care about latency. Everything should be handled transparently by Cubase.
If you play virtual instruments via a MIDI keyboard or pad controllers or want to play your guitar through an amp simulation to hear exactly the sound you want while recording, then you need to be aware of latency, where it can occur and how to mitigate it.
Audio driver latency
One of the biggest source of latency is the buffer size of the audio interface driver. The smaller the buffer size, the lower the latency, but also the higher the CPU consumption and the possibility of drop outs.
The buffer sizes should be set to at most 256 samples, better lower, for sample rates of 44.1/48kHz. If you work at higher sample rates, the latency gets lower at the expense of more CPU usage, so you might actually have to increase the buffer size again.
If you are using the Steinberg built-int ASIO driver on Windows, you cannot set the buffer size, it is fixed.
How to set the buffer size
In the menu bar, select “Studio->Studio Setup”, then select the entry with your audio interface name on the left side, under “Audio System”, and click “Control Panel”. This should open a window where you can set the buffer size.
Plugin Latency
Some VST plugins introduce an additional delay when processing audio, due to the nature of their DSP algorithms. Those add to the overall latency of the system. Cubase compensates for this delay, so that all tracks are still perfectly aligned at the output.
To see the delay introduced by plugins, you have to enable “Channel latency” in the mix console window setup (top right toolbar button). This will display a sum of the total channel latency above the fader section, you can click on the field and see a detailed description for each plugin:
Constrain Delay Compensation
If you have plugins in your projects that introduce longer delay (be it on a track, a group, the master bus or even the control room), you can start to feel it when e.g. playing a VSTi instrument: the time between when you hit a note and when the sound appears can become noticeable and is irritating.
“Constrain delay compensation” can help with that. It disables any plugin with a delay on tracks that are record or monitor enabled (i.e. are in the real time path of the audio engine) so they don’t add delay any more. The plugins appear grayed out and cannot be opened/edited any more.
Of course, this might lead to your project sounding somewhat different without those plugins, but you would only enable “constrain delay compensation” before recording and disable it when you are done.
You activate/deactivate it with the 
button on the top tool bar or the transport bar, or with the function menu in the mix console. If you use it often, better set your own key command.
Delay Compensation threshold
This is a setting in the preferences (in the “VST” category) that allows you to set a threshold in milliseconds which influences what plugins “Constrain delay compensation” disables..
For example, if you set the value to “1.0 ms”, any plugin that has a delay of under one millisecond won’t be disabled and will still process audio, of course adding again it’s delay.
It is a trade off and you have to see for yourself which amount of delay you can tolerate.
