Keep in mind this is the GENERIC/DEFAULT for the modification, and does not necessarily mean Lee will keep it like this. They're trying to find the best way to calcuate something specific and he may make some adjustments to the activity.
Just a brief run down of how it works though:
This hack adds an activity metric for users to your forum; this metric takes into account a variable number of weeks.
Visiting each day and posting the configured amount of times per day for the configured number of weeks will yield 100% activity. Posts are checked individually for each day, so days cannot be skipped then spammed up afterwards. The weight of visiting for the day relative to posting is configurable. Weeks are weighted so the most recent has a bigger impact on the activity percent than the most distant.
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So, in essence, there are certain variables such as logging in, posting, replying, etc. I am not sure what they are set for exactly right now, but I think they'll be changed around anyway (or that part may not even be used, not sure).