Two statistics are currently the most commonly used as indicators of a pitchers effectiveness: ERA (earned run average) and WHIP (walks and hits per innings pitched). Here I will desribe the formula and usefulness of these stats.
For many years ERA was the only statistic used to determine a pitcher's effectiveness. The goal of this stat is to show the average number of runs given up by a pitcher per nine innings pitched. (If a run is the result of an error it is considered an unearned run and is not calculated into this formula). This number is found using this equation: earned runs allowed / innings pitched x 9. For instance, if a player threw 8 innings in a game and allowed 2 runs the equation would be: 2/8x9= 1.77ERA (for that game).
The problem with the ERA is that it figures runs given up after a pitcher exits a game. Every runner a pitcher puts on base will be counted against his ERA and will be credited to him even if he doesn't throw the pitch that drives in the runner. Many starting pitchers suffer from inflated ERAs if their relief pitchers are not effective and regularly allow their inherited runners to cross the plate. ERA is also not useful when subjected to small smaple sizes as the resulting numbers can be excessively large.
In 2010 Felix Hernandez led the majors with a 2.27 ERA (for starting pitchers with a qualifying number of appearances). An ERA of 3.00 is considered very good. An ERA of around 4.00 with at least 100 innings pitched is still the mark of an effective pitcher.
This stat was introduced in 1979 (by Daniel Okrent) and is currently used along with ERA as a mark of pitcher performance. This number is a result of this formula: walks+hits/innings pitched. It tells us how frequently a pitcher allows a baserunner. A WHIP of 2.00 means that pitcher allows 2 batters to reach base each inning. For instance, in 2010 Felix Hernandez (mentioned above) threw 249 innings with 194 hits and 70 walks: 70+194/249=1.06WHIP. A WHIP of between 1.00-1.30 is reserved for the most effective pitchers. Above average/average pitchers will land their WHIPs in the 1.4-1.8 range.
ERA is almost always accompanied by the WHIP stat since WHIP is not subject to runs pitched in by another pitcher and is a simple number that shows how effective a pitcher is at keeping runners off the base-paths.