From a technical standpoint, "saturation" is the extent of chromaticity for a certain hue...the hue's "colorfulness". Technically speaking, pink would be a less colorful magenta, but roughly the same hue, where as red would be a distinct and colorful hue on its own. You might think of light rose or salmon to be less colorful variations of red.
When it comes to things that can affect saturation in a photographic context, the story can be fairly complex. For the time being, lets eliminate post processing, and only factor in the physical aspects.
- Pre-Camera Interference
- Any obstructions between light and the camera can affect saturation...things that disperse and scatter light will usually produce a softer color than what it started out as...and extensive dispersion can eliminate most color entirely resulting in shades of gray. (i.e. fog, mist, clouds)
- Optics in the Lens
- The various materials used in a lens itself can affect saturation of different wavelengths of light.
- These days, transmission of light through a lens is very high...above 90% in most cases. Even so, most lenses will absorb a certain amount of the light that passes through them, and will absorb different wavelengths to differing degrees. This can have a minor affect on saturation, but a measurable one.
- Better optics, better multi-coating, fewer elements, etc. all contribute to improved transmission, saturation and resolution.
- Sensor Design
- The sensor itself is also a factor that affects saturation.
- In a bayer sensor, you have an uneven distribution of red, green, and blue pixels, each of which have their own color filters above them that filter out wavelengths that don't fit their color (i.e. blue pixels filter out most green and all red light). The materials used for the filter will also filter out some amount of the desired wavelengths of light as well, as transmission is again less than 100%.
- In a Foveon style sensor, each pixel has layers of photo-sensitive elements. Each subsequent layer is going to receive less total light, excluding the color from the preceding layer minus any transmission loss.
- Some light in all sensors will simply be reflected or absorbed by non-photosensitive elements, affecting the saturation of those lost wavelengths.
- A variety of random factors can affect saturation, from natural randomness of photos, thermal factors, to issues of quantization and precision in conversion from analog to digital.
All these factors contribute to a loss of the original apparent saturation of light that we saw with our own eyes (which, while similar to cameras, have far fewer obstructions...our lenses are simple and highly transmissive, and our rods and cones are orders of magnitude more sensitive, all of which greatly reduce the amount of loss in accuracy before that light is processed by our brains.) The native, unprocessed RAW output from a modern sensor is pretty dull, lacking in both contrast and saturation (but usually appearing to have far more dynamic range than we usually work with in post). Most RAW processors apply an attenuated, multi-channel tone curve to RAW images by default (and only a couple open source options allow you to view the original native RAW image), producing the better initial results we see when we open up a photo in say Lightroom or Aperture. From that point on, its all a matter of mathematic adjustments that aim to recover the saturation that was lost.
How much saturation looks "good" or "realistic" is entirely a matter of artistic style and personal preference at that point. You can increase or decrease saturation at will, by small or very large amounts. Once a photo gets in the hands of the photographer, saturation takes on a very different meaning than it has when talking about color and saturation of a lens, or whether a sensor produces saturated images or not. Hardware-level color saturation really means less today than it may have in the past with film, as we have nearly unlimited control over our photos today that wasn't possible with color film and color photographic prints.
I thought I should add an edit, and note some caveats with the statement above about color and saturation at a hardware level not mattering. I had a fairly narrow vision of what that related to when I wrote the above, however its not entirely accurate. On a professional level, particularly for publications (newspaper, magazines, lots of various print and online editorials and the like), JPEG is still the most used format. A lot of professional sports, Olympics, photojournalist, political, etc. photographers tend to send their shots directly to their employers for immediate publication, as at-the-moment publication has become incredibly important these days. One of the things that made me think of this is the new Canon 1D X's ethernet port, which allows the camera to save images directly to a network attached resource.
With immediate delivery and publication, hardware level, in-camera image quality does have meaning. Rich, saturated, sharp, clear photos can be extremely important for up-to-the-moment publications. Given that such professional work is a huge driver of camera and lens sales, there are reasons why color quality, saturation...at a hardware level...are still very important.