Potential growth is roughly the growth of hours worked plus the growth of output per hour. That makes demographics and productivity the two things that determine an economy's long-run speed limit, and it explains why ageing populations have slower trend growth.
Potential is not observed, only inferred, and estimates are revised for years afterward. It also anchors the neutral-rate: faster potential growth supports a higher real neutral rate, which is why an artificial intelligence-driven productivity surge would raise long-term bond yields rather than lower them.
Example: labour force growth of 0.4% plus productivity growth of 1.5% gives potential growth near 1.9%. Actual growth of 3.0% for two years therefore opens a positive output-gap of roughly 2.2 percentage points.
Related: output-gap, productivity, neutral-rate, real-gdp, labour-force-participation