# Difference between observed errors and this error matrix in kalman filter?

I have been watching this video series to try to understand the kalman filter. The instructor has this layout explaining the process. What I don't understand is the difference in the error matrix Z in equation 5 and observation errors. The error matrix in the title is the Z matrix.

The image above is from here and he elaborates about equation 5 in this video. In the elaboration video, he says that Z differs from the observation errors in the bottom right corner and these errors represent delays in the electronics. These errors makes sense to me but I thought they were the observation errors. What are observation errors then? Is there a physical explanation to them?