The data layer is a JavaScript object on the page that holds structured information about what is happening on the site, for tools such as Google Tag Manager to read. Instead of each tag scraping data from the HTML, they all read from the same source.
On an online store, the data layer receives events such as product views, add to cart, begin checkout and purchase, along with details such as product ID, price, quantity, currency and order value. GTM uses this data to feed GA4, ad platforms and other tools.
A well-designed data layer uses consistent event and parameter names, correct values (for example, with or without VAT, but always the same way) and does not send personal data unnecessarily. When the data layer breaks, every report and optimisation that depends on it is compromised.
On WooCommerce
A plugin or custom development is usually needed to produce a complete eCommerce data layer. It is worth checking that each event fires only once and with the right values, especially on the order confirmation page.