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How it is calculatedEdit
Effective character level is calculated by adding your total racial hit dice, class levels and Level Adjustment. Members of the standard races have an ECL that equals their character level.
What it meansEdit
Your effective character level is a measure of your power as a character. All characters of the same ECL are in theory of the same power level. Naturally there will be differences, but on average the statement is true. You gain experience etcetera based on your effective character level, not your character level (although these are often the same).
Why it existsEdit
Certain races are intrinsically more powerful than others, either because they possess racial hit dice or because they have powerful abilities. ECL exists to balance this out sacrificing hit points, base attack bonus, saving throw bonuses and class abilities for higher ability scores and special abilities.