It refers to the ratio of advertising cost relative to profits garnered from different conversions.

ROI or return on investment gives an indication to your business about the gaining`s in return to cost incurred in running ads against it. Understanding ROIs is very important for defining success to an Adwords account. It is not easy to measure the exact ROI. However, you can do calculations by removing revenue from sales and subtracting cost of advertising from it and then dividing the number thus obtained against advertising costs in total. They are generally expressed in terms of percentage with respect to initial investment you made. By using relevant ad texts, keywords and improving landing pages, ROIs can be improved a lot.