Latent diffusion is the trick that made high-resolution image generation affordable. A standard diffusion model learns to reverse a gradual noising process, and it does that work directly on pixels. Every denoising step touches every pixel, so training and sampling get expensive fast: Rombach and colleagues noted that training powerful pixel-space models often consumed hundreds of GPU days.
Latent diffusion splits the job in two. First, an autoencoder is trained once to compress images into a much smaller grid of numbers, a point in its latent space, and to decode them back with little visible loss. Then the diffusion model is trained entirely on those latents. The autoencoder handles fine perceptual detail; the diffusion model handles the content and layout of the image.
How much to compress
The paper labels each model by its spatial downsampling factor. Compress too little and you keep most of the cost; compress too much and detail is lost before diffusion ever sees it. Factors between 4 and 16 struck the best balance between efficiency and faithful results in their experiments.
Conditioning on a prompt
To steer generation, the denoising U-Net gets cross-attention layers that read an encoding of the condition, such as a text prompt or bounding boxes. The same design covered text-to-image synthesis, inpainting, semantic scene synthesis and super-resolution.
This is the recipe behind Stable Diffusion, which pairs latent diffusion with a pretrained text encoder and large-scale training. For a summary of the original work, see the latent diffusion paper.