The separation altitude is a critical component of electronically scored events. This defines whether a target is to be scored 2-dimensionally or 3-dimensionally. It is only used with physical targets. This is because if the pilot is unable to place a physical marker on the ground, then they may still place an electronic mark. 

This is where the separation altitude comes into play. The separation altitude is a flat plane at a set altitude. If the pilot's GPS records the electronic mark below this altitude the result will be 2-dimensional, projecting it onto the same plane as the target (and reducing the distance of the result). If the mark is recorded above this altitude, then it is scored 3-dimensionally to that altitude. 

See the image below for a visual breakdown of this concept. It is helpful to understand the pythagorean theorem, but not mandatory.