Depth is how much size rests at each price level on either side of the book. It determines how large an order can be before it moves the price, and it is the difference between a quoted price and an achievable one for anything bigger than a token trade.
Depth is also a signal, not just a constraint. Size appearing and disappearing, imbalance between the two sides, and quotes pulling in unison ahead of a move are all readable from a full-depth archive and invisible in a price-only series.
Backtesting a size-sensitive strategy on a price-only series. Without depth there is no way to know whether the trade was possible at the size the backtest assumed.
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