Gun time is the total elapsed time from when the starting gun fires to when a runner crosses the finish line, regardless of how long it took them to reach the start line itself. It's also called clock time, and it's the standard used to determine overall race winners.
It's the total time from the official starting signal to when you cross the finish line. It includes any time spent walking to the start line in a crowded field.
Yes, overall and elite prizes are almost always decided by gun time, since front-of-field runners start right at the line. This keeps the competitive result fair for the lead pack.
Because most runners aren't standing right at the start line when the gun fires, especially in large fields with wave or corral starts. The bigger the field, the bigger the gap can be.
Not much, your official personal result is usually chip time. Gun time mostly matters if you're competing for an overall placing.
Some certificates list both gun time and chip time. Your personal result is generally chip time, but gun time may still be shown for reference.