Final answer:
The fatty insulating sheath that coats the axon of neurons is called the myelin sheath. It allows for faster transmission of electrical signals.
Step-by-step explanation:
The fatty insulating sheath that coats the axon of central and peripheral neurons is called the myelin sheath. It is a lipid-rich layer of insulation that surrounds the axon and is produced by glial cells called Schwann cells. The myelin sheath allows for faster transmission of electrical signals along the axon.