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For a given package of work, it is the process of building an estimate of activities and costs, starting with each individual activity or cost, and then aggregating them upwards to come up with a total.
In other words, start at the lowest level you can (the highest level of granularity in terms of detail), and for each item in that level, estimate its cost and the work required, and then come up with a sub total for that level. Repeat the process for each level until you reach the top of the work package (the end result), and then add the sub totals to yield a total estimation.
Using a WBS structure will help guide you through the levels of activities.
It's more accurate if you need more control & understan your project & budget.
