calories

Let's say that you do some exercise that burns off 500 calories.

Eating back your exercise calories would mean that you would eat your basic calorie goal plus that 500 calories. If your basic daily goal is 1500 calories, you would eat 2000 calories total.

If you ate back 50% of your exercise calories, that would be 1500 + 250 for a total of 1750 calories.

MFP gives you a daily goal without any exercise included. If you move more, then you should eat more. So, if you exercise, it adds those calories to your daily number for you to eat. Even if you eat them all, you'll still be in a calorie deficit. (assuming your logging is accurate) This is designed so you you will not have too big a deficit and will have energy to fuel your workouts. Essentially following the idea that exercise is for fitness, calorie deficit is for weight loss.

The general advice here is that you eat only a portion of them back to account for often exaggerated calorie burns given by mfp's calculators. Then you can see how it works for you and adjust accordingly.