It is defined as the ratio of the actual brain mass to the expected brain mass of a typical animal that size, EQ=m(brain)/Em(brain). The formula for the expected mass of the brain varies, but is usually , though for some classes of animals the power is 3/4 rather than 2/3.
Roughly speaking, the larger an organism is, the more brain mass is required for basic survival tasks, such as breathing, thermoregulation, senses, motor skill, etc. The larger the brain is relative to the body, the more brain mass might be available for more complex cognitive tasks. This method, as opposed to the method of simply measuring brain mass alone, puts humans closer to the top of the list. Also, reflecting the evolution of the recent cerebral cortex, different animals have different degrees of brain folding, which increase the surface of the cortex, which is positively correlated in humans to intelligence (Duncan et al. 1995).
Dolphins have the highest brain to body mass ratio of all cetaceans. Sharks have the highest for a fish, and octopuses have the highest for an invertebrate. Humans have a higher brain to body mass ratio than any of these animals. Birds and dinosaurs generally have a relatively smaller encephalization quotient, partly due to lower thermoregulation and/or motor control demands compared to mammals.
It is a trend that the larger the animal gets, the smaller the relative brain size gets. Large whales have very small brains compared to their weight, and small rodents have huge brains. One explanation could be that as an animal's brain gets larger, the size of the neural cells remains the same, and more nerve cells will cause the brain to increase in size to a lesser degree than the rest of the body. This phenomenon has been called the cephalization factor; E = CS2, where E and S are body and brain weights and C is the cephalization factor. Just focusing on the relationship between the body and the brain is not enough; one also has to consider the total size of the animal.
In the essay "Bligh's Bounty", Stephen Jay Gould noted that if one looks at vertebrates with very low encephalization quotients, their brains are slightly less massive than their spinal cords. Theoretically, intelligence might correlate with the absolute amount of brain an animal has after subtracting the mass of the spinal cord from the brain. This formula is useless for invertebrates because they do not have spinal cords, or in some cases, central nervous systems.
The brain to LBM (Lean Body Mass) ratio is a better indicator than the brain to gross body mass ratio. Cetaceans have a much higher percentage of body fat compared to non-obese humans (30-40%), as the average fat percentage of non-obese humans is 15% for men and 25% for women, increasing marginally with age. If we estimate the gross body mass of a bottlenose dolphin at 250 kg and the percentage of body fat at 30 and deduct the 75 kg of fat mass from gross body mass, the LBM will be approximately 175 kg, brain mass approximately 1700 gram (1.7 kilograms), which lifts the percentage of brain mass very close to 1% of LBM. These figures are just an example because the gross body mass of bottlenose dolphins can be anywhere between 200 and 500 kg. There is however another argument for this thesis, based on the brain to body ratio of men & women. Females generally have a somewhat smaller brain volume than males, but if you correct for the higher percentage of body fat in women the ratio/EQ will be the same as in males. This correlates with the result of IQ testing, the same in average for males and females.