The picture above is taken in test facilities at fitnessdk Valby near Copenhagen.
VO2 is a measure of how much oxygen the body takes per minute. The more O2 the body gets, the more work can it complete over a longer period of time. VO2 max is the maximum level of oxygen the body can inhale. In principle, the higher this measure the bigger the ability of the body to work (i.e. physical activity like run, bike etc.) by generating energy. The amount can vary from 2 l/min for untrained individuals to 7 l/min for elite athletes. This measurement is generally considered the best indicator of cardiovascular fitness and aerobic endurance. The test is widely used for determining the cardio-respiratory fitness level because the muscles need oxygen for prolonged aerobic) exercise, and the heart must pump adequate amounts of blood through the circulation to meet the demands of aerobic exercise.
To measure the VO2 max, a mask is inserted on the head and month, as seen in the picture and the person doing the test slowly works himself up to maximum intensity to reach the point where the body inhales the maximum amount of oxygen (the level of CO2 that is exhaled is also measured). Usually the maximum heart rate is also reached during the test. The test can be done an a treadmill, bike or rowing machine. The maximum intensity work should vary for at least 5 minutes, but the longer it is the more accurate the test.
The test can also be used to determine the heart rate level that the body will start utilizing carbohydrates during a moderate to intense workout. This is done by looking at RER (respiratory exchange ratio). An RER of 0.70 indicates that fat is the predominant fuel source, RER of 0.85 suggests a mix of fat and carbohydrates, and a value of 1.00 or above is indicative of carbohydrate being the predominant fuel source. For example, on the test results below, 173 bpm is the threshold of carb utilization.

The fitness level number can be derived from dividing the measured VO2 with the body weight. Therefore this is considered a measure of how efficient is the body to transport itself. Logically, if the body is to heavy, the efficiency will decrease regardless of the VO2 number. The fitness level number is a good metric for general well being of a person and risk to life style related sickness; a higher the number corresponds to a low risk. Therefore, the fitness level number will improve if you just loose weight! On the other hand the ability of the body to increase the oxygen levels it takes is done by interval training. Below is an overview of the ranges for the fitness level for man (top) and women (bottom). For elite athletes this number can be more than 70. The results presented here are mine and I weighted 85 at the time. My fitness level was about 49 being the the middle range, but if I lost 3-5 kg, I would be in the high range instead.

Consult the internet for more information.