The price to earnings ratio is how much money you are paying for $1 of company earnings. For example if a company is reporting a profit of $2 per share and the share price is $20, then the PE ratio is 10, in other words you are paying ten-time earnings.
PE = Price per share / annual earnings per share
The PE is not very useful on it own, but it is a useful comparison tool, you can use it to compare a company against its peers in the same industry as well as compare it to historical performance.