The system predicts your odds of winning based on your team’s average SR.
The approximate formula based on the Elo rating system is (and I’m sorry if it looks terrible - these forums don’t have any mathematical typesetting available):
E(A) = 1/(1 + 10^(-D/832))
Where D is the difference between team A’s SR and team B’s SR. So D=SR(A)-SR(B). The 832 refers to how steeply the change in rating corresponds to a change in skill. The typical Elo system uses a value of 400, but by a statistical analysis of over 3000 competitive games, it appears Overwatch uses a value near 832.