ERA+ takes a player's ERA and normalizes it across the entire league. It accounts for external factors like ballparks and opponents. It then adjusts, so a score of 100 is league average, and 150 is 50 percent better than the league average.
For example, Mariano Rivera's 2.21 career ERA was 105 percent better than the MLB average during the time he pitched (including adjustments for park and league). That gives him a 205 career ERA+ (the best all-time).
League ERA, adjusted for park factors x 100 / ERA.
Why it's useful
ERA is the most universally accepted tool for measuring the performance of a pitcher. But ERA+ is actually a more accurate league-wide barometer, because it evens the playing field for all pitchers.
This can be a good tool in ranking pitchers who may have switched teams, because ERA+ adjusts for park and league. But otherwise, for fantasy purposes, ERA is a more useful stat.