You can think of data source as a list of predefined options that you can use (and re-use) with Autocomplete, Select, Checkbox, and Radio fields in the Custom Fields editor.
Why use data sources?
You might be thinking: why do I need a data source when I can enter the options directly in the field while configuring the form? The answer is: The data source allows to easily re-use the options with any form that can be edited with the Custom Fieldseditor.
For example, you might want users to select item condition in [adverts_add] and then to allow searching by the condition from [adverts_list]. The data source will allow you to enter the options once and then only assign the data source to the field.
Since the options are entered only once if you will want to update the list of options later you will need to do it in one place only.
Types of data sources
In order to create a data source, you will need to have Custom Fields 1.3 or newer installed on your website. Once you do that go to wp-admin / Classifieds / Options / Custom Fields / Data Sources / New Data Source.
We have 3 types of data sources but will cover mainly 2 (predefined options and taxonomies) as the last one (callback functions) requires some programming knowledge which makes it a bit more advanced topic.
Each type is a bit different and is described in a separate article: