Absolute power (power output from the transmitter and power received by the receiver) is measured in dBm.
As shown in the table below, dBm can be directly converted to Watts since both describe a specific value. A given power in dBm represents the power relative to a reference level of 1 mW (milliwatt = 1 thousandth of a Watt). For example, the output power and receiver sensitivity in an SFP module would be described in dBm.
Relative power (loss in the network between the transmitter and receiver) is measured in dB.
This describes how much a signal will be attenuated through a component or over a given distance. The loss is independent of the absolute powers involved and only indicates how much the power changes. By knowing how much a signal will be attenuated in a given fiber network, we can determine the optics that are powerful enough to transmit the signal.
Power is usually measured in Watts (W). The advantage of using the dBm unit is that it simplifies calculations of power and losses in a communication link.
When both power and loss are given in dBm/dB, simple addition and subtraction are used: Transmitter power (dBm) - Loss1 (dB) - Loss2 (dB) = Received power (dBm).
Note that dB/dBm follows a logarithmic scale, unlike Watts, which follows a linear scale. This means that even relatively small changes in dBm can result in significant changes in power (Watts). For example, a 20 dB loss means the signal becomes 100 times weaker.