Pot Odds is a pretty funny poker term. It is used by many bad poker players after hitting their miracle gut shot draw. They look at their opponent (who was usually a huge favorite), and state "I was getting pot odds to call" The truth is, more often then not, pot odds will tell you to fold your hand, not call with it. There are many types of pot odds. We will begin discussing them below.
Basic Pot odds
To calculate the basic odds a pot is giving you, you simply divide the size of the pot with the size of the bet. For example, if the pot is $100, and you have to call a $10 bet, you are receiving 10-1 pot odds ($100 / $10). This information is used in conjunction with your outs (the number of cards you can hit to make your hand a winner) to determine your best way to play the hand. Let's say you have a pair of sevens in holdem. The flop is 2 10 K. There is a bet. You know your opponent has AT LEAST a 10, and probably a K. Should you call? Simply take your outs (the two remaining 7's), and figure out your chances of hitting your hand on the turn or the river to determine if calling or folding is best.
Implied Odds
Implied odds are the future potential bets you will receive if you make your hand. A typical example of this would be calling a raise with a small pair in no limit holdem. Lets say that you have $400 in front of you, and your opponent has more then $400. You might be willing to call a $16 bet preflop because of the implied odds of hitting your set and taking his entire stack. The principle is that if you hit your set on the flop, you have the potential to bust your opponent, or at least make a lot of money from him. Its kind of the 'future' of poker, and is almost always an estimate. This can apply in limit holdem, but not to as much of an extent. Lets say you are in position over your opponent who has the lead (is the player betting). You have an up and down straight draw on the flop. You might call a bet on the flop with incorrect 'pot odds', because you know that if you hit your straight on the turn, you will be able to raise and then bet the river for 3 big bets, giving you increased 'implied odds' for your hand.
Reverse implied odds
For reverse implied odds, consider that you have a strong hand but little chance of improving and your opponent has a chance of improving to a hand stronger than yours, or possibly already has a hand stronger than yours (they have been betting and you are not sure if they are bluffing) - essentially a situation where you are not certain that you have the best hand. Say it is the turn and there is $12 in the pot and it is $4 to call (pot odds 3-to-1). If your opponent has a weak hand or misses their card they may stop betting in which case you would only win $12 (it costs $4 to find out you are winning). Otherwise, you have committed to playing to the end of the hand in which case it would cost you $8 to find out you are losing (pot odds 3-to-2).
Aggressive actions (bets and raises) are subject to reverse pot odds, because they win the minimum if they win immediately (the current pot), but may lose the maximum if called (the current pot plus the called bet or raise). These situations may also occur when a player has a made hand with little chance of improving what he believes may currently be the best hand, but an opponent continues to bet. If the opponent is weak or bluffing, he will likely give up after the player calls and not call any bets the player makes. If the opponent has a superior hand, he will continue the hand (extracting additional bets or calls from the player).
Here is an example of reverse implied odds in limit holdem: With one card to come, Alice holds a made hand with little chance of improving and faces a $10 call to win a $30 pot. If her opponent is weak or bluffing, Alice expects no further bets or calls from her opponent. If her opponent has a superior hand, Alice expects the opponent to bet another $10 on the end. Therefore, if Alice wins, she only expects to win the $30 currently in the pot, but if she loses, she expects to lose $20 ($10 call on the turn plus $10 call on the river). Because she is risking $20 to win $30, Alice's reverse implied pot odds are 1.5-to-1 ($30/$20) or 40% (1/(1.5+1)). For calling to have a positive expectation, Alice must believe the probability of her opponent having a weak hand is over 40%.
Outs and calculating your outs
Understanding pot odds is only 1/2 the equation. You also need to figure out your chances of improving your hand, assuming you are on a draw. A quick mathematical system used by most intermediate players is to take your outs (number of cards that will give you the best hand) and multiply them by 2 for a street-to-street decision (ie. turn to river), or by 4 for a flop-to-turn decision.
An example. You have 10J, and the flop is 892 rainbow. You know that a 7 or a Q will give you the nut straight, so you have exactly 8 cards to give you a guaranteed winner. Your odds of making your straight by the river are 8X4, or 32%. You can now look at the pot size and determine if calling a bet is profitable based on your outs. For example, in fixed limit holdem if the pot is $100 and you have to call $10 on the flop, you are getting 10-1 pot odds. Your chances of making your hands from flop to turn are 2X8, or 16%, which is higher then 10%, therefore it is an easy call. Also, using implied odds in this situation will further increase your odds. If you hit your hand on the turn, you should be able to raise the turn and then bet the river, giving you 3 large bets.