The effective part means it is measured against many partners at once, weighted by how much trade is done with each. The real part means it is adjusted for inflation differentials, as in the real-exchange-rate. Together they answer the only question a policymaker cares about: how competitive is this economy right now.
REER is published by central banks, the IMF and the BIS as an index with a base period set to 100. A reading of 115 means the currency is 15% stronger in real trade-weighted terms than in the base period, not 15% above fair value.
For traders it is useful as context on multi-year positioning. Currencies at multi-decade REER lows tend to be ones where a long cycle is fully priced, which is a different observation from saying they are about to turn.
Example: an index at 88 against a long-run average near 100 says the currency is about 12% weaker in real trade-weighted terms than its own history, even if it has rallied against the dollar this month.
Related: real-exchange-rate, trade-weighted-index, purchasing-power-parity, terms-of-trade