You apply a known air pressure to the cylinder, usually 100 psi for ease of calculation and measure the pressure in the cylinder with a second gage. That is then compared to the inlet pressure in terms of a % of leak down. If the incoming pressure is 100psi and the cylinder holds 97 psi then the sealing is 97%. A good engine should be from 90% to 99% with race engines expected to be over 95%. The engine must be at TDC with both valves closed which is not always easy to ensure.
The true benefit is in the diagnostic useage of the leaking air. If you hear air hissing out the exhaust pipe, it’s the exhaust valve, the inlet: it’s the intake valve, the crankcase breather: the rings and the valve cover: the valve guides.
A simple diagnostic tester can be cobbled up from a spark plug shell with an air nipple welded to it if you aren’t concerned with the % of leak down and just want to introduce air pressure into the cylinder. In this case you can use a lot lower air pressure also.
In the US, Harbor Freight sells a perfectly decent tester for $99, and I’m sure other countries have similar outlets selling cheap Chinese tools as well.
The two gages are screwed into an alloy block with a small orifice between them to allow air to be restricted. You set it up to test by adjusting the inlet pressure to give 100psi on the gage upstream of the orifice before connecting to the cylinder. This is with the spark p,uh fitting uninstalled, then when screwed into the spark plug hole it will read the pressure of that cylinder. If you use 100psi on the inlet then 97 psi in the cylinder is 97% sealing, no calculation needed.
Corrected: to clarify how it works!