There are a number of different methods which purport to measure intelligence, the most famous of which is perhaps the IQ, or 'Intelligence Quotient' test. The 'Stanford-Binet Intelligence Scale' began life in early 20th century Paris, as part of Alfred Binet’s efforts to educate children with learning difficulties. Those that obtained a score below their age were considered "retarded".
IQ is a 'psychometric' test, meaning it measures mental ability. However, defining intelligence is far from simple. There are two main schools of thought. The first believes in an inherited, genetically determined intellect that can be measured. The second group of psychologists believe in many intelligences, the development of which may be the result of our social background. They also think that measuring these intelligences is also problematic.
The modern day IQ test measures a variety of different types of ability such as verbal, mathematical, spatial, memory and reasoning. The test is then 'pre-tested' on a group of people representative of the wider population. Then it's graded so that the majority of people will be get between 90-110.
When graphed, this is a curve in the classic 'bell' shape where most people are distributed around the average intelligence (or intelligence score) and few people are at the extreme ends of low and high intelligence.