It's actually a roughish [inexact due to absence of some arithmetical factors, and odd units of measurement] expression of the weight/cross-sectional area ratio.

Obtained by dividing the bullet weight [lbs] by square of diameter [inches].

So for a given diameter, a heavier bullet will be longer [natch] and have a higher SD. And lose velocity [and hence energy] less over distance, than a lower SD bullet.

It's used really as a rough approximation for Ballistic Coefficient, which has to be measured as change in velocity with distance. And is dependent on a lot of external variables like starting velocity, air density, yada yada. This one expresses the bullet's drag function, as a proportion of that of a particular standard test bullet. So nose shape is taken into account here.

Any of the ballistics software packages around can calculate SD. You can do it on a calculator, as Bullet Wt [grs]/(7000xDiam^2[in])