The extinction ratio in optical specifications refers to the ratio of optical power levels used to represent binary data, specifically the power level for a "1" compared to a "0." It is calculated using the formula: Extinction Ratio = logic 1 power / logic 0 power. A common example is a ratio of 10, where a laser transmits 1mW for logic 1 and 100µW for logic 0. This ratio does not directly indicate the loss of bits but rather the distinction between the two power levels, similar to how different voltage levels represent binary states in electrical logic. Understanding extinction ratio is essential for interpreting signal quality in fiber optic communications.