Standard deviation is a measure of how spread out numbers are from the average. It is calculated using an equation for either a full population or a sample of a population. In an example, 5 pirates were surveyed about their gold coins, with amounts of 4, 2, 5, 8, and 6 coins. The mean was calculated as 5 coins. Then each amount was subtracted from the mean and squared. These squared differences were summed and divided by the sample size minus one, resulting in a standard deviation of 2.24 gold coins, representing the spread of coin amounts among the pirates.