The VIX volatility index, which hit a record high above 70 early Friday, is often bandied about as a measure of fear in the market – but in case you’re wondering what’s behind it, here’s a quick primer.

The simplest explanation is that the VIX measures the market’s expectations of stock-market volatility over the next 30 days, based on options on the S&P 500 index. It tends to go up during market declines and periods of fear, while it tends to go down during calmer periods and “up” markets.

The VIX was introduced in 1993 by the Chicago Board Options Exchange. In 2003 the methodology was revised to incorporate out-of-the-money options as well as in-the-money ones, and to base the index on the S&P 500, rather than the S&P 100, which had been used previously. VIX options were launched in February, 2006.

“When things are good (macroeconomically) and the market’s not that volatile, you get a level of complacency,” said Ben Lonergan, Co-CEO of Group One trading, the market maker for VIX options at CBOE.

Lonergan notes that the VIX futures curve, at least, has some positive thoughts about the markets: “it’s telling you this (selling) can’t last and won’t last,” he said.

The curve right now looks like this: October 59, November 41, December 36, January 33, February 31 and March 29.5. So market expectations are that “we might not rally huge off these levels, but we’re not going to keep selling off at 5% per day,” Lonergan said.

The index isn’t just a curiosity, either. “The VIX is a real, legitimate way for people to hedge their equity exposure,” Lonergan observed. “You can hedge your portfolio to the downside simply by buying VIX options.”

Lonergan added that small and retail investors tend to like the VIX products because they’re very volatile, so the potential up side is often greater than it is, say, with a stock. (Of course, that means the potential down side is bigger, too.)

Here’s a chart showing the movement of the VIX over the past year:

And for those who want to get into the nitty-gritty details, here’s the explanation, from a CBOE paper, of how it’s calculated.