When (US) TV viewers or entertainment writers refer to "ratings," they are talking about Nielsen Ratings, a system developed by the Los Angeles based Nielsen Market Research firm to determine which shows television viewers watch at what times. The system as it exists today was developed in the early 1960s, and has since been the primary source of marketing information in the television industry. Since television as a business makes money by selling audiences to advertisers, the Nielsen Ratings are the single most important element in determining advertising rates, schedules, and program content.
Nielsen Ratings statistics are gathered in two ways: one is by extensive use of surveys, where viewers in various demographics are asked to report what television shows they watch at what times. The other is by the use of a limited number of Nielsen Boxes, which are small computers hooked up to a television in a home, which electronically records its activities. These Nielsen Boxes allow market researchers to study television viewing habits on a minute to minute basis, seeing at exactly what moment a viewer changed channels or turned off their TV.
Nielsen Ratings are reported by ranking the percentage for each show of all viewers watching television at a given time. One "point" on the scale represents one tenth of a percentage point.
The Nielsen company also provides statistics on estimated total number of viewers, and on specific demographics. Advertising rates are less influenced by total number of viewers than they are by appealing to particular demographics, such as age, sex, economic class, and area. Younger viewers are considered more attractive for many products, where as in some cases older and wealthier audiences are desired, or female audiences are desired over males. Television ratings are not an exact science, but they are a powerful force in determining the programming in an industry where millions of dollars are at stake every day.