The ratio divides long value by short value. 3:1 means three dollars long per dollar short; 1:1 is balanced in dollars, though not necessarily in risk.
It is a fast sanity check against your own narrative. Traders who describe themselves as cautious frequently discover a 6:1 long book, because shorts are harder to find, harder to hold and psychologically unpleasant. The ratio makes that bias visible in one number.
Adjust for beta before drawing conclusions. A 1:1 dollar ratio that is long high-beta growth and short low-beta staples is still substantially long the market - possibly +30% in beta terms - and will behave like a directional bet in a selloff.
Related: net-exposure, gross-exposure, beta, portfolio-beta