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Action can generally be described as the distance between your strings and your frets when you are not fretting them, usually measured as the distance between any string and the top of the 12th (or sometimes 24th) fret. This depends on your nut height, your bridge height, and your truss rod tension. Properly setting up your action is way beyond the scope of this guide; we are only focusing on how action affects your tone, assuming whether you can set up your guitar correctly for your desired action.
High action is often regarded to have "better" tone (see below), but can be more difficult to play. This is mainly due to poor setup in other areas, which causes a lower area to have too much fret buzz. It can also be more difficult to get a good intonation (making you sound out of tune). Low action runs the risk of fret buzz, especially when other aspects of your setup are bad or you pick aggressively and use a thick pick. For metal, fret buzz is a no-no (too noisy). I like a medium to low action across the board - high enough so that I don't get a strong buzz when I pick the strings at a low to medium stength.