Custom Audience is an advertiser-owned or platform-built audience such as website visitors, customer lists, or engagement audiences.
It matters because most visitors do not convert on the first visit. Retargeting terminology helps teams create thoughtful follow-up sequences, avoid wasted impressions, and respect audience exclusions and privacy expectations.
Example
An advertiser might define one custom audience from eligible website visitors and another from customer records. Keep their source and purpose explicit so reporting does not combine unfamiliar prospects with existing customers.