One cut: keep the largest weights
Suppose you may keep only a fixed number of Schmidt terms at one cut. Which approximation comes closest to the original state? Schollwöck states the answer in Eq. 19 of his review: keep the terms with the largest singular values and set the rest to zero. The squared distance to the original state then equals the sum of the dropped Schmidt weights, called the tail.
No other choice does better at that cut. Any state with that many terms or fewer across the cut is at least the tail away from the original. The tail is therefore a floor, set by the state itself, that no algorithm can beat for that bond dimension.
Many cuts: a lower and an upper bound
A matrix product state truncates every cut. The best single cut already gives a lower bound: the squared error cannot be smaller than the largest tail along the chain. For an upper bound, Verstraete and Cirac proved in Lemma 1 of their 2006 paper that the squared error is at most twice the sum of the tails over all cuts. Schollwöck repeats the bound as Eq. 58.
Take the critical twelve-spin chain of the compression Lab. At bond dimension four the largest tail is 1.58 millionths, the measured squared error is 5.66 millionths and the sum of tails is 6.16 millionths, so twice the sum is 12.3 millionths. The measured error sits inside the bounds, and closer to the upper one, because every cut adds its own tail.
Worked example
Why local readings stay accurate
Truncate a single cut and split the state into the kept part and the dropped part. The two parts use different Schmidt terms, so their left states are orthogonal and so are their right states. Take an operator that acts only on spins to the left of the cut. In the cross term between the kept and dropped parts, the right states meet only each other, and their overlap is zero. The cross term vanishes, and the reading changes only by terms of the size of the dropped weight.
A correlation between the two ends of the chain acts on both sides of every cut. Its cross term survives, and its error can be as large as the distance between the states, which is the square root of the squared error. The Lab shows the difference. At bond dimension four the squared error is 5.66 millionths, so the distance is about 0.0024. The energy per site is off by 2.2 millionths and the largest single-site magnetization by 2.1 millionths, both of the size of the squared error. The end-to-end correlation is off by 0.0015, of the size of the distance. The energy has one more protection: the exact state is an eigenstate, so the first-order change of its energy cancels for any small change of the state.
The tail decides what to keep
How fast the Schmidt weights fall decides how much you must keep. For the gapped chain at a field of 2.5, bond dimension two already gives a squared error of about ten millionths. The critical chain needs bond dimension four for a similar error, and the random state has no short tail at all: it still misses more than half its squared norm at bond dimension sixteen.
Choose the bond dimension for the measurement you need. Local energies and magnetizations converge at the rate of the squared error. Long-range correlations converge at its square root and need a larger bond dimension for the same accuracy.