What does “anonymous” mean in cryptocurrency?

Could you please clarify what is meant by the term "anonymous" when it comes to cryptocurrency? Does it imply that users can completely hide their identities and transactions from any form of scrutiny or tracking? Or does it simply mean that transactions are pseudonymous, with users identified only by unique digital addresses rather than their real-world identities? Additionally, how does the level of anonymity in cryptocurrency compare to traditional financial systems, and what are the potential implications of this for privacy, security, and regulation?