This is straight from the National Weather Service
PoP = C x A where “C” = the confidence that precipitation will occur somewhere in the forecast area, and where “A” = the percent of the area that will receive measureable precipitation, if it occurs at all.
So… in the case of the forecast above, if the forecaster knows precipitation is sure to occur ( confidence is 100% ), he/she is expressing how much of the area will receive measurable rain. ( PoP = “C” x “A” or “1” times “.4” which equals .4 or 40%.)
But, most of the time, the forecaster is expressing a combination of degree of confidence and areal coverage. If the forecaster is only 50% sure that precipitation will occur, and expects that, if it does occur, it will produce measurable rain over about 80 percent of the area, the PoP (chance of rain) is 40%. ( PoP = .5 x .8 which equals .4 or 40%. )
In either event, the correct way to interpret the forecast is: there is a 40 percent chance that rain will occur at any given point in the area.”