Optical microscopy is fundamentally limited by diffraction–the bending of light that prevents resolution below approximately half the wavelength of illumination. For visible light, this creates a resolution floor of ~200–300 nm laterally, reduced to ~70–100 nm in confocal systems.
When two fluorescent signals overlap at this resolution, they are "colocalized"–but this overlap could represent proteins that are genuinely interacting (separated by 1–10 nm) or proteins that happen to be in the same cellular region but are 70–100 nm apart.
At 70 nm separation, two proteins are not interacting. They cannot form a receptor-ligand complex, cannot engage in checkpoint signaling, cannot propagate downstream pathways. Yet colocalization analysis cannot distinguish this scenario from genuine binding.