Fold equity is the additional equity that you gain in a hand when you believe there is a chance your opponent will fold. This is what makes semi-bluffing in poker profitable. For you to gain fold equity you must bet or raise – an opponent cannot fold to no bet.
The percentage chance that your opponent will fold to your bet or raise increases your total equity in the hand by that amount. This can of course be wrongly calculated as you must make an educated estimate on how often they will fold.
Total Equity = Current Equity + Fold Equity
For example, if you have a draw and believe that your hand will win 30% of the time, this is not very good as you will lose 70% of the time this hand goes all the way to showdown. However if you believe that there is a chance your opponent will fold his hand to a bet 50% of the time then you now make a judgement of your fold .
Fold Equity = chance our opponent will fold * opponent's equity in the hand
Therefore, if we think that we have 50% equity against our opponent and that he will fold to a bet or raise 50% of the time, then our Fold Equity is 25%. Using the above example, assuming we have a draw, this will bring our overall equity to 55%. Indeed, fold equity can be highly useful in these types of situations and allows you to effectively "semi-bluff" your opponents profitably.