Well, you've almost got it right. The Dow figure quoted ad nauseam throughout the day on CNBC, CNNfn and other places does incorporate the prices of the 30 stocks that make up the Dow Jones Industrial Average. But it's not the raw total of those prices. To explain how the average is actually calculated, however, requires understanding a bit of history.

Wall Street Journal co-founder Charles Dow created the Dow index back in 1896 when he was looking for a quick reliable way to track the stock market, which consisted mostly of railroad stocks. At first, the index had just 12 stocks, although it grew to 30 by 1928, at which point it included many industrial companies, including General Electric, which is the sole survivor of the original Dow dozen. In those days before computers and spreadsheets, Dow had to come up with a simple way to calculate his index. So, he simply added the prices of the 30 stocks in the index and divided by 30 to get their average -- hence, the Dow Jones Industrial average. By tracking this average, Mr. Dow could see whether the stock market overall was heading up or down.

The Dow is still calculated the same way today, except that the original divisor of 30 has had to be lowered to keep the Dow consistent in the wake of various stock splits, mergers, replacements and such over the years. If you want to experience the thrill of calculating the Dow yourself, you'll find the current divisor as well as the names of the Dow stocks on page C3 of the Wall Street Journal every weekday.

The Dow is still the most widely followed stock barometer, but it has some inherent flaws. First, there's no way that 30 stocks can give a true overall picture of the market these days. Second, while Charles Dow's methodology might have been okay at the turn of the century, it doesn't pass muster today, when most indexes are based on companies' market values rather than just their stock prices. So if you want to get a more accurate sense of what the overall market is doing, I suggest you check out market value-weighted indexes like the Standard & Poor's 500, which tracks 500 large companies that are leaders in their industries, and the Wilshire 5000, which tracks virtually all publicly traded stocks in the U.S.