The luckometer is intended to answer the following question: What quality of cards have I been dealt, relative to my opponents? Perhaps you have just experienced a large drop in a heads-up match. The luckometer can help you determine if you were simply dealt a bad run of cards, or if you are on tilt.
"Luck" is defined by a simplistic, objective formula based only on the cards dealt. The player who is dealt the winning hand receives the luck for that hand, and the players dealt losing hands receive the corresponding amount of negative luck for that hand.
"Luck" is proportional to the strength of the hands dealt. For instance, flopping a nut flush is considered luckier than flopping two-pair. However, it is considered far luckier to flop a nut flush, if your opponent also flops the second nut flush.
Luckometer results are well defined for heads-up play, and an extremely high correlation with luck is typical between evenly matched players. The Luckometer ratings are more difficult to define for full-ring games, and so the correlation is less significant.