The purpose of this add-on is to help you understand the average item level of what items you have equipped. Since blizzards item level only shows you the average item level of the best equipment you have (bags & equipped).

Places a line below the "Item Level" line of the General stats in the character pane. This line shows the average item level of the equipped items you are wearing. If you are missing an item it is counted against you in the average calculation (i.e. a fury warrior with a 2h Mace but no weapon in the offhand will have a 0 placed for the item level of the offhand and it will be included in the average).

This should match the equipped item level in the armory that you see.