WPI, or "Wraps per Inch," is a common way for knitters, spinners, and weavers to estimate the thickness and yardage of yarn.
There are lots of ways to measure WPI - including wrapping your yarn around a ruler. But there are also lots of dedicated WPI tools, like the ones in my shop. Because who doesn't love a tool that's also a sheep?
Shameless plug aside, it does matter how you actually wrap the yarn - pull it too tight or leave it too loose, and your estimate is off. It's best to gently wrap the yarn without tugging it, laying each wrap next to the previous one without cramming them together or leaving any empty space. The number of times you can wrap the yarn around a one-inch section is your wraps per inch.
It takes practice, but with time, you'll get a pretty accurate result. And it's important to remember that WPI is a useful estimate - there's no substitution for swatching and sampling your yarn.
So what does WPI help you estimate? Say you want to substitute a yarn in your stash for the yarn called for in a pattern you're knitting. If you know the WPI of the yarn called for in the pattern, you can check the WPI of your stash yarn to see if they're a close enough match.
Don't know the WPI of the yarn called for in the pattern? You can usually suss it out if you know the yarn "weight," or thickness, or the gauge called for in the pattern. Ravelry has a handy guide to yarn weights and WPI, which can help you figure it out.
In weaving, WPI can help you figure out a starting point for how close together your warp and weft threads should be - for plain weave, I take my WPI and divide it in half to get my starting point, and for twills, I usually use 2/3 of the WPI for my starting point.
And in spinning, not only can WPI help you get the yarn weight/thickness you want, it can also help you make sure you're spinning consistently if you check your WPI often.
And what about yardage? If you know your WPI, you might also be able to get a rough estimate of yardage, usually expressed as "yards per pound" or "YPP." You can find a guide to WPI and YPP here. But remember that it's a rough estimate and nothing beats swatching or knowing the yardage from the yarn label!
So there you have it! How have you used WPI in your fiber projects?