OPS adds on-base percentage and slugging percentage to get one number that unites the two. It's meant to combine how well a hitter can reach base, with how well he can hit for average and for power. As a result, OPS is widely considered one of the best evaluative tools for hitters.
Batting average, slugging percentage and on-base percentage all have basic flaws, which don't exist in OPS. However, OPS isn't perfect, because it values on-base and slugging percentage equally. In reality, a point of on-base percentage is worth more toward a team's run expectancy than a point of slugging percentage.
Still, OPS is one of the most universally accepted tools for evaluating player performance at the plate. It can also be used in evaluating pitchers; when used in that context, it is referred to as OPS against.
Watch: Nelson Cruz raises his OPS by recording a walk, a homer and a double.
As OPS measures a hitter's overall effectiveness across multiple batting components -- hitting for average, as well as on-base and slugging ability -- it tends to correlate well with fantasy-stat output. In other words: the higher a hitter's OPS, the likelier he is to contribute in batting average, RBIs, homers, runs and, to a lesser extent, steals.