A formula calculates a single value based on constants (such as 1.07 or "hello"), operators (such as "+" or ">"), and field references (such as Subtotal or InvoiceTotal) you enter. For example, if sales tax in your area is 7% and you have a field named Subtotal, you could create a field named InvoiceTotal that gets the value of the formula Subtotal * 1.07.
If a formula is especially common or popular, FileMaker Pro Advanced gives it a name and defines exactly how you should use it. A named and predefined formula is called a function. For example, if you want to find the average of some test scores, you could write your own formula to add them all and divide by the total number of scores. A simpler approach would be to use the function named Average and follow the rules defined for its use.