Ideal insulation under AC voltage behaves as a pure capacitor and the current leads the voltage by exactly 90°. In real insulation there are losses and that phase shift is slightly smaller; the tangent of the missing angle, delta, quantifies how much energy is dissipated as heat inside the dielectric. Hence the names tan delta and dissipation factor.
It is one of the most sensitive tests available for transformer, bushing and machine insulation, because it detects diffuse degradation throughout the volume of the material rather than a single localised defect. Typical values range from under 0.5 % in new insulation to several per cent in badly deteriorated insulation.
It is measured by applying AC voltage, often at 10 kV, and comparing against a reference standard. Since it depends strongly on temperature, the result is corrected to 20 °C before comparing it with the equipment history or with sister units.