Pot Odds

Many players mistakenly believe, even some experienced players, that you're wrong to continue in situations where you're not favorite to win. This is usually good advice, but it's advice that doesn't take into account any of the circumstances other than the (current) strength of your hand and what you believe your opponent to hold. In the example above, with the flushdraw, you should definitely not fold if the pot is laying you better odds than 4:1. You're a huge dog (meaning that the odds are strongly to your disadvantage) but you will win the big pot often enough to make it worth continuing. When the pot offers you high odds, you don't need to win often, is the lesson here.

Let's turn to an example outside poker, again: If you and I were betting on the roll of a die, and you bet $1 that it would come up a 6, how much would you need me to pay you if you wanted to make a profit from the bet? Well, my odds of winning are 5:1; there are 5 ways that I can win, and only 1 way that you can win. You need, therefore, odds that are better for you than 5:1. If I pay you $6 when you win, and you pay me $1 when I win, you will show a long-term profit, because if we roll the die 600 times, for example, you will win on average 100 times (100 * $6 = $600) and lose 500 times (500 * $1 = $500). The money that you stand to win, as compared to the amount of money that you need to invest to be able to win them, is what constitutes your pot odds. In the above example with the flush draw, your pot odds needed to be better than 4:1 to continue - the pot needed to be at least four times as big as what you had to pay to call. It's a way of qualifying your investment, you could say.

Source: Cardschat.com