Story points measure the relative effort required to complete work items. Unlike time estimates, story points consider complexity, uncertainty, and effort together. Teams use a sequence like Fibonacci numbers (1, 2, 3, 5, 8, 13) for estimation, where larger numbers indicate more complex work. Estimation happens through team discussion and consensus.

Build a reference scale by identifying a simple "1 point" story and estimating other items relative to it. A story estimated at 5 points should be about five times more complex than a 1-point story. If any story is estimated at 13 or higher, it needs breaking down into smaller pieces.

Points help measure team velocity (average points completed per sprint) and improve future sprint planning accuracy. Velocity naturally varies between teams based on their scale, so it shouldn't be used for team comparisons.