Too often web hosts talk about bandwidth and data transfer in the same breath but truth is known they are different although very closely related. Bandwidth is how much data can be transferred at a time and data transfer is how much data is being transferred.
Think of it this way. If bandwidth were a bridge, then the bigger the bridge is the more vehicles can pass through it. While data transfer is the number of vehicles allowed on the bridge in say a month. In essence, data transfer is the consumption of bandwidth.
How It Affects the Site ?
The less bandwidth you have, the slower your site takes to load regardless of the visitor’s connection type. If you have more visitors, some of them will have to wait their turn. The least data transfer you have, the more often you’ll find your site unavailable because you’re reached the maximum allowed until a new month rolls by or you upgrade your account.
How can we Reduce Transfers ?
Another good idea is to cache your website but you might want to set an expiry date in the HTTP headers so the browser will refresh the content after a certain time. Use mod-gzip. It could save you as much as 40% of your bandwidth. Out of control robots can also suck down your bandwidth like a black hole. So use robots.txt to keep spiders in check.