Christopher A. answered 02/22/21
Ph.D.-trained Statistics & Psychology Tutor
A latent variable is a representation of a "thing" (often referred to as a "construct") that cannot be seen or measured directly but, is theoretically assumed to exist.
One classic example of a construct is intelligence. We have no way (at least currently) to directly assess how much intelligence a person has. The best we can do is to collect data from things which we believe are valid and reliable indicators of intelligence (e.g., speed and accuracy of answering academic questions).
Many mental health disorders, such as depression, are also constructs. Similar to intelligence, we cannot directly assess how much depression someone has. The best we can do is collect data about things we believe to be valid and reliable indicators of depression. The DSM-5 is considered to the agreed upon guide for determining which indicators should be used to assess depression (at least in the United States).