Conductors have resistance, and current through resistance produces a voltage drop. Over a short run it is negligible; over a long one it is not.
The two separate questions
Ampacity asks whether the conductor will overheat. It is a safety requirement and it is what the Code enforces.
Voltage drop asks whether the equipment at the far end receives enough voltage to work properly. The Code addresses it in informational notes recommending limits rather than as a hard requirement.
Both have to be satisfied for the circuit to be useful, and on long runs the second requires a larger conductor than the first.
The recommended limits
Commonly cited: 3% on a branch circuit, 5% total including the feeder.
At 120 V, 3% is about 3.6 volts. At 240 V it is about 7.2.
What too much drop does
Motors run hotter and produce less torque. A well pump or a compressor at reduced voltage draws more current for the same work, which heats the windings and shortens its life. This is the most consequential case.
Incandescent lighting dims noticeably. LED lighting is largely indifferent until the drop is severe, which is why lighting is no longer the symptom it once was.
Heating elements produce less heat, in proportion to the square of the voltage.
Electronics generally cope, up to a point, by drawing more current.
Where it governs
Detached garages and outbuildings, where the run can be a hundred feet or more.
Well pumps, which are both distant and motor loads.
Long circuits in a large house, particularly to the far end of a basement or an upper floor.
EV chargers placed at the end of a driveway rather than at the house.
Landscape and outdoor lighting, though the low-voltage kind has its own version of the same problem.
Roughly how it scales
Voltage drop is proportional to the current, the length, and the resistance per foot of the conductor.
Doubling the length doubles the drop. Going up one conductor size reduces resistance by roughly 20 to 25% and reduces the drop by the same proportion.
That is why the practical remedy is simply to upsize: a 20 amp circuit run 150 feet is commonly wired in 10 AWG rather than 12, and a subpanel feeder to a detached garage is frequently two sizes above its ampacity requirement.
Calculating it
The full calculation uses the conductor's resistance per thousand feet, the one-way distance doubled for the return path, and the current.
In practice an electrician uses a table or a calculator, and the answer is a conductor size. What matters for a homeowner is knowing to ask the question when a run is long, because a quote priced on ampacity alone will specify the smaller wire.
What not to do
Raising the breaker size does nothing for voltage drop and removes the overcurrent protection the conductor needs.
Accepting the drop on a motor circuit, which trades a one-time material cost for a shortened equipment life.
The one that surprises people
The drop occurs under load, so a circuit measured with a meter and nothing running looks perfect.
The measurement that means anything is taken at the far end with the load operating, and the difference between that and the panel voltage is the answer. It is a two-minute check on an existing circuit that has always seemed weak.
Aluminium on long feeders
For a long feeder to a detached building, aluminium conductors are frequently the economical answer.
They have higher resistance per size than copper, so the size goes up — but the material cost per foot is much lower, and on a hundred-foot run that difference outweighs the extra size.
The terminations need antioxidant compound and torque to specification, and the equipment terminals must be listed for aluminium. Both are ordinary and both are sometimes skipped, which is where aluminium's reputation for connection problems in this application comes from.