Angular distance is the distance between two objects from the observers point of view. If you were to hold a pencil at arms length (horizontally) so you could see both ends, the distance between the tip and the eraser would be called the angular distance. As long as you arent on hallucinogenic drugs and your arm doesn't change length, that distance should remain the same. You might call that angular distance "pencil length" (at arms length). If you were to bring the pencil in closer, the angular distance would become greater. Angular distance is relative to the observers point of view.

When two objects are not horizontal, but the horizontal angular distance needs to be expressed (as in astronomy), a vertical line would be put through a fixed point (one of the objects) and the other. an expression of this angular distance is called azimuth.