Conversion Rate (as it applies to Pay Per Click) is a pretty easy concept.
Number of Visitors to your Website / Number Conversions Achieved
Example – 1000 Visitors / 100 Contact Us Forms Submitted = 10% Conversion Rate.
Conversions can be any of several things and is determined by what you deem as a valuable interaction of a user with your site. Something like a user completing a Contact Us or Request A Quote form for example might be a conversion for you. Joining a Newsletter or viewing a certain page on your site might even be a conversion for you.
Google AdWords Pay Per Click Conversion Tracking:
If you are advertising with a Pay Per Click platform like Google AdWords it is very important to utilize their free Conversion Tracking Tools. This will help you see if your Advertising is leading to sales, form fill outs, and other conversions.