The capacity chart shows the project team's judgment of how much work can be done with the resources available and the time period represented in the planning folder.
The capacity chart is for measuring capacity for a particular planning folder. Its main purpose is for sprint planning to assert how under- or over-capacity you are for a particular sprint/release. Then, during the sprint, you can tell how you are doing on remaining effort, estimated effort, and asserted capacity.
The data behind the capacity chart is updated in real time, so that your team can respond quickly to changes in effort estimates or relative priorities.
Capacity is expressed as a numeric value, using the same scale as you are using for estimated, remaining, actual effort accounts.
You can see the capacity of a planning folder in the planning folder summary view.