I'll give it a shot. Basically it's the amount of credit you are using. So if card limit is $1000 your statement cuts showing you have a balance of $800, your utilization is 80% - NO GOOD!!! 800/1000x100 = 80 on that individual card, which is scored by FICO.
The other part of util, if you have 5 cards with a credit limit of $10000, balances reporting on each card total $8500 is 85% util. again NO GOOD!!!!
Both factors are counted separately and together to make up your util. The quickest way to see scores increase is generally to reduce util.
There are two types of utilization on your CR....revolving and installment and both are viewed seperately. For future discussion, ignore installment utilization. It is a teeny tiny part of FICO scoring and shouldn't be worried about. Thank goodness that FICO ignores it. Adding a $300k mortgage won't tank your scores for being maxed out.
So, here's the skinny on revolving utilization: It is a very large component of FICO scoring. Some on here can max out their CCs tomorrow and see 100+ losses in FICO scores. Some who are nearly maxed out or maxed out can pay off their CC debt and see 100+ gains. Your existing creditors subscribe to your CRs and can see your balances. Maxed out accounts can lead to APR rate hikes, credit limit decreases, and even CC closures by the creditors you do business with now. Conversely, low balances and paid off cards can lead to credit limit increases, lowered rates, and even preapproval or extensions of credit. Revolving util is a big deal.
Utilization is described well above. You simply take the balance that is reporting on your CRs and divide it into the reported credit limit. That equals a percentage of your CL used (hence util). In terms of FICO, FICO looks at both individual util and overall util. To calculate overall, simply add up all of the reported balances and divide it into the sum of the reported CLs. Whenever a poster in here asks what your util was, typically they are referring to your overall util.
For maximized utilization in the eyes of FICO, get all of your cards to $0, except for one, and get that one to less than 9% of the reported CL of that CC. Oddly enough, you can get a ding in FICO score by having all $0 balances. This is certainly a Your Mileage May Vary (YMMV) situation. Some find better results at 2%, some at 5%, and so on. But at that point, you are micro-micromanaging over a few points here or there.
For your reported balances and CLs, know that your credit card company(s), typically only report one time per month. Except for a couple of oddballs, most all creditors report the balance you had on the statement date and will report that balance 2-3-4 days following the statement date to your CRs. So, if you pay half of your balance down two-three weeks prior to the statement, but use the card again before the statement date, your CR won't reflect the full payment made because you ran up the balance. We call this gaming the system. You stategically pay off your CCs just in time to get it to reflect the balance you want it to report when it reports.
Bad utilization isn't a big deal in the short-term. Maxing your balances to 80% isn't that bad if only for a couple of months. Creditors aren't likely to take action. However, your FICO will take a hit. Thankfully, there is no permanent damage with regards to util. FICO does not have a memory of your balances 3 months, a year, or a decade ago. FICO is a snapshot in time and you'll get all of your points back when you pay off the account.
As mentioned, per FICO, util is a big deal. I once saw a 125 point increase on EQ FICO just by bringing balances down from 89% overall util down to 1% overall util. TU saw gains of around 80, IIRC. Bringing down CC utiliztion is the fastest way to improve your scores, but the most expensive too. Know that your mix of credit (e.g. how many CCs you have) plays into your points gained or lost. For example, if I only had one card and that one card was at 89% and I brought it to 1%, I would not see 125 point gains on EQ. I'd see 30-40 if I'm lucky. The more cards you have, the better your mix of credit. IMO, the best mix would include 2-3 revolving cards like VIsa, MC, Discover, with 1 additional CC from a store (reporting as a store charge card like Macys, Target, etc.).
REvolving util includes all of your CCs like Visa, MasterCard, Store cards, Discover, and certain Amex CCs. There are special considerations to think about. Cards like No Preset Limit CCs, like Visa Signature or WorldPoints CCs, or Amex charge cards (e.g. Green, Zync, Platinum, etc.) factor in separately and the balances are largely ignored by newer FICO score versions. These cards do not report a credit limit. Any CC that does not report a CL are ignored from util calculations. Any CC that is closed and reports a $0 balance are ignored from util calcs. Included CCs....any CC that is closed and reports a balance factors into CC util. Any CC that is charged-off and reports a balance can be factored into CC util (provided it reports a CL...sometimes a high balance is considered). Also, accounts like LOCs and HELOCs are included into CC util provided the CL isn't large. That limit is a mystery but it is probably around $30k+. To cheat, your FICO report will sometimes tell you your overall CC util.
I typed too much... 
