For example, if you had an nForce2 board with an Athlon XP 1700+ (133MHz FSB) in it, and you stuck DDR333/PC2700 memory into it, you would not be utilizing the memory to its fullest potential by running it at the standard 2xFSB (266MHz). So you apply a DRAM ratio to make the memory run faster than just 2x the FSB.
So, in order for your processor to run at 133MHz while your memory runs at 166MHz (333MHz effective), you need to apply a DRAM ratio of 5:4 (133*5 / 4 = 166).
It really isn't applied to overclocking much except when you're going for pure GHz (you would slow the memory down compared to the FSB so you could raise the FSB up really high to get your processor to run really fast, so the memory wouldn't be overclocked and cause system intsability). Most of the time you want to run it at 1:1 (performance is better when the memory and processor don't have to wait for eachother due to being out of sync).