The short answer
Betting odds are nothing more than the market prices of bets. A value bet is a bet whose odds have a probability higher than the real probability of it happening.
So, a value situation is where the odds offered from a bookmaker reflect a probability that is less than the actual probability of that outcome occurring, which basically means that odds are wrong in your favor.
More in details
Let's consider the example of a (fair) coin toss: there are two possible outcomes, equally probable, as the coin either lands on heads or on tails with a 50% probability. Using this probability to calculate the odds would give us a decimal price of 2.00 for heads and 2.00 for tails (in fact 100/50 = 2.00).
So let's say we have two bookmakers.
- Bookmaker X is offering odds of 1.90 on heads, while
- Bookmaker Y is offering odds of 2.10.
We can calculate the value this way:
(Probability * decimal odds) - 100%
So let's look at Bookmaker X.
- He is offering us 1.90.
We calculate the value:
(50% multiplied by 1.90) - 100% = -5%
At -5%, Bookmaker X is offering us less than true chance. This is not a bet we would want to take. It is not a value situation!
Instead, let's look at Bookmaker Y.
- He is offering us 2.10.
Let's calculate the value:
(50% multiplied by 2.10) - 100% = 5%
Bookmaker Y is offering us 5% value to bet on heads in a coin toss. We would take this situation, as it is indeed a value opportunity.