GUN time refers to the amount of time it takes a participant to finish from the 'official start' (in track meets and many professional competitions, the literal vertical shooting of a gun) to when a person finishes. More typically, races begin with the sound of an air horn, siren, whistle, or someone simply yelling, 'Go!' The GUN Time is the time that you see on the large display clock present at nearly all finish lines.
NET time refers to the amount of time it takes a participant to finish based upon when he/she crosses the physical start line. NET time can never be more than GUN time and is always less than GUN time except for those who start literally on the starting line (or only a step or two behind it/based upon time rounding to the next highest second.) NET time can only be provided at events that have transponder equipment (ie. 'start mats') at the start line. Not all events do this; rarely will you ever see a cross country race or track meet with start mats. There are also some road races that do not use start mats.
USATF (United States of America Track & Field) requires that only GUN time be used for awards. Rules 165.16, 245.1, and 245.3 discuss this.
In short, the usage of NET time for awards destroys head-to-head competition. A true race is one in which the first to reach the line is the winner.
Relying on NET time further creates an unsettling environment in which one competitor may wait until the entire competition has started and then begin running,
only to catch up but run behind an opponent without he/she knowing that he/she is there. A true race is one in which the winner of a 'sprint to the finish' is the winner.
Unless your race is a USATF Championship, you are not required to utilize GUN time as your awards basis but AREEP recommends it.
Definitely use GUN time for your overall awards, especially if giving out CASH prizes. We do see a fair amount of races using NET time for the age group awards. If the start of your event takes several minutes for runners to cross the start line, you may feel a stronger inclination to use NET time for the age groups. It is 'fine' to do so (if not a USATF Championship event); above all else, simply make sure that your awards basis is publicly stated somewhere prior to the event.
Nearly all races offer awards. Typically races give out 'overall' awards to the first three males to finish the race and to the first three females to finish the race.They then give out awards in age groups by gender, for which those already given 'overall' awards are excluded.