Utilization is the percentage measurement of hop's alpha acids "utilized" during the boiling process. This gives you a formulated number to measure the bitterness of a final beer known as IBU's (International Bittering units), AAU's (Alpha Acid Units), or HBU's (Home brew Bitterness Units).
 Equations for determining utilization
Utilization increases with your hops boiling time, so the longer you boil your hops the more bitterness you will have. Boiling hop additions in the 0-10 minutes range or less add little bitterness, and are mainly used for aromatic hop additions. Flavor hops are usually boiled anywhere from 10-20 minutes and add hop flavor with a few units of bitterness to the wort. Bittering hops are added for the full boil time of 60-90 minutes and provide the most bittering of all your hop additions.
Hop utilization can also be decreased if you raise the gravity of your boil volume. Brewing a high gravity beer, or some extract brews using a partial-batch boil will get you a much lower utilization rate. This is the reason extract brewing routinely requires more hops than all-grain brewing for equivalent sized recipes. Different brewers, equipment, and techniques make it highly important to measure and know your own pre-boil volume and pre-boil specific gravity when you need to estimate the bitterness of your final beer.
Three main equations are used to estimate utilization and IBU's are most often used: Rager, Tinseth and Garetz. The equations differ in the way that they estimate the utilization percentage. Rager is most often associated with extract and partial mash brewers. The Rager equation takes original gravity of the boil into account, and tends to produce IBU estimates that are on the high side of the three equations. It’s important to understand that the three estimation methods will provide widely varying results in some cases. Each provides only an estimate of bitterness, and none are perfect or all encompassing. I would not spend too much time worrying the differences. Choose a single estimation method and stick with it.[Smith,2008]
[Pyle,1995] Norm Pyle, Realbeer.com Hops FAQ's page
--By WortMonger, member of HOMEBREWTALK.COM 11:43, 4 September 2008 (CDT)