A "vertical datum" is the elevation portion of a "geodetic reference system". In simplified terms, a geodetic reference system is the basis used to accurately and precisely describe the location of a specific site on the Earth in terms of its longitude, latitude and elevation. A vertical datum is a benchmark for describing site's height or elevation. The geodetic reference system utilizes a geoid1, and a reference ellipsoid2 — two mathematical representations of the Earth's surface — along with a base point to which the latitude, longitude and elevation of all other points in the system are referenced. For more information, see the discussion of vertical datums on the National Geodetic Survey's website.
The National Geodetic Vertical Datum of 1929 (NGVD29), was established by the National Geodetic Survey (NGS) by connecting the major vertical benchmark3 networks in the country to 26 tidal benchmarks along the Atlantic, Gulf, and Pacific Coasts. For decades the NGVD29 was used to establish monitoring locations, reference points and elevations of natural features such as lake and floodplains, as well as for bridges and levies.
As technology improved, it was determined that the NGVD29 did not accurately represent sea and lake levels, nor did it allow for accurate delineation of flood zones. Beginning in the early '70s, geodesic scientists4 began developing a new vertical datum that would allow for more accurate and representative establishment of horizontal and vertical locations of all points on Earth's surface. This new datum, North American Vertical Datum of 1988 (NAVD88), was finally established by the NGS in 1991. It provides significant improvement in accuracy and applicability over very large areas. All new NGS benchmarks are established in NAVD88.
1An ellipsoid or reference ellipsoid is a mathematically-defined surface that approximates the "figure of Earth" or another planetary body.
2The geoid is essentially the figure of the Earth abstracted from its topographic features. It is an idealized equilibrium surface of sea water, the mean sea level surface in the absence of currents, air pressure variations etc. and continued under the continental masses. The geoid, unlike the reference ellipsoid, is irregular and too complicated to serve as the computational surface on which to solve geometrical problems like point positioning. The geometrical separation between it and the reference ellipsoid is called the geoidal undulation. It varies globally between ±110 m. Put another way, the geoid surface is irregular, unlike the reference ellipsoid often used to approximate the shape of the physical Earth, but considerably smoother than Earth's physical surface. While the latter has excursions of +8,000 m (Mount Everest) and –11,000 m (Marianna Trench), the geoid varies by only about ±100 m about the reference ellipsoid of revolution.
3A benchmark is a permanent, stationary object on which is set a surveyor's mark. The benchmark locations are depicted on maps and used as reference points for accurately establishing the coordinates of another or other points.
4Geodesic scientist: a specialist in geodesy, a branch of applied mathematics concerned with measuring, or determining the shape of, the earth or a large part of its surface, or with locating exactly points on its surface.