Diverse connotations of angular resolution for different types of astronomy observations present conflicting requirements to orbital astronomy system designers as well as to optical instrument designers. Interpretations are offered of the physical meaning of angular resolution, especially as it relates to linear resolution in the focal plane, for various types of astronomy observations, including detection of faint sources, imaging of extended sources, separation of close stars, spectroscopy, polarirnetry, photometry, etc. Quantitative values of angular resolution requirements for each type of observation from a representative set of specific observations developed in a recent study are discussed. From these numerical examples, the collective influence of various angular resolution criteria on the design of systems and telescopes for orbital astronomy are also discussed. Finally, the role of system tradeoff analyses in deciding between diffraction-limited and non-diffraction-limited telescopes for orbital astronomy is explained.