Second-law efficiency, denoted by η, is a measure of how effectively a thermodynamic process converts available energy into useful work compared to the maximum possible work. It is calculated using the formula η = (w_actual / w_max) x 100%, where w_actual is the actual work output and w_max is the maximum theoretical work output. Understanding this concept allows for evaluating the performance of engines and other systems by comparing their actual output to the ideal performance dictated by the second law of thermodynamics.