The sign preserves direction: a positive residual indicates that the observed response is above the fitted response, while a negative residual indicates that it is below. This distinction matters when interpreting whether predictions fall short of or exceed observations, rather than merely measuring the magnitude of the discrepancy. The signed value therefore carries directional information about model error.
Taking the absolute value removes direction and retains only the size of each discrepancy, making it useful when the magnitude of prediction error is the focus. Squaring also removes the sign, but it gives greater emphasis to larger discrepancies. These two transformations support different ways of evaluating how closely fitted responses correspond to observed values.
Least-squares regression selects model parameters by minimizing the sum of squared residuals. Because squaring prevents positive and negative discrepancies from canceling and emphasizes larger errors, the resulting fitted model reflects a specific mathematical criterion for closeness to the data. This connects individual observed-versus-fitted differences to the overall selection of a regression model.
Begin with an observed response and its corresponding fitted response, then subtract the fitted value from the observed value to retain a signed residual. Depending on the analysis, keep that residual, take its absolute value, or square it. The resulting quantities can then support assessment of fit, comparison of predictions with data, or evaluation of discrepancy size.
For each observation, the residual records how far the fitted response differs from what was observed. Reviewing these discrepancies provides a direct basis for comparing model predictions with data, while absolute or squared versions summarize their sizes without directional cancellation. This makes the measure useful for judging how closely a regression model represents the observed responses.
An observation with a notably large discrepancy from its fitted response can receive attention as potentially unusual within the model's results. Across the data, these distances also help describe variation in the response variable and contribute to judging model fit. Their interpretation links individual deviations to broader questions about how well the fitted relationship represents the data.