A team's strength of schedule is made up of 3 components.
The 3 components:
AdjEM is the overall strength of schedule of a team
AdjO - Opponent's average adjusted offensive efficiency
AdjD - Opponent's average adjusted defensive efficiency
AdjEM for strength of schedule is calculated:
AdjEM of SOS = AdjO - AdjD
A team's AdjEM for SOS is difference between the average of its opponents' offensive and defensive efficiencies.
A team does have some control over its schedule. It can choose or agree to its non-conference schedule.
The non-conference strength of schedule uses the same calculation and 3 components only for this portion of the schedule. It doesn't include post season or conference games.
For example, let's use the 2017-2018 North Carolina team. Its overall strength of schedule was rated first in the country at +13.26.
Using the 3 components:
AdjEM = 13.26
AdjO = 111.6
AdjD = 98.3
AdjEM = 111.6 - 98.3 = 13.26
This means North Carolina's 2017-2018 opponents would be expected beat the average Division-I opponent by about 13 points over 100 possessions.
North Carolina's non-conference strength of schedule was +7.58.
North Carolina played 17 non-conference games. These 17 opponents would be expected to outscore the average Division-I team by about 8 points.
Sagarin's WIN50 method shows the strength of a team that would be expected to win half its games against the team's schedule. It compares all teams on the same scale and reduces the impact of outliers.
The previous method used by KenPom measured a team's strength of schedule by the average of its opponents' rating. This means outliers like playing the 350th or 351st team would have a negative impact on a team's SOS.
The WIN50 method doesn't put too much emphasis on the quality of bad opponents a team plays. It's more fair than previous methods.
Outside of factoring into a team's rating or predicting how it will perform, strength of schedule can be used to rate different conferences as a whole.
Ever wonder if the ACC is the better than the Pac-12 or SEC? And want data to back it up?
Strength of schedule can be used to support what you believe. The same methods, including Sagarin's WIN50, are used to rate conferences.
KenPom defines a conference's rating as the strength of team that would be expected to go .500 against a round robin schedule.