The Average Rating is an average of the individual critic scores, based on a 1-10 scale. Each critic's original rating scale (star, letter grade, numeric) is converted to a number between 1 and 10, and then the numbers are averaged. Reviews without original ratings are not counted, and a minimum of five reviews with original ratings is required.
The Average Rating measures the overall quality of a product based on an average of individual critic scores. The Tomatometer simply measures the percentage of critics who recommend a certain product.
For example, while Men in Black scored 91% on the Tomatometer, the average rating is only 7.5/10. That means that while you're likely to enjoy MIB, it wasn't a contender for Best Picture at the Oscars. In contrast, Toy Story received a perfect 100% on the Tomatometer with an average rating of 9/10. That means that you are not only certain to enjoy it, you'll also be impressed with the direction, story, cinematography, and all the other things that make truly great films great.