The formula $$z = \frac{\lambda_{observed} - \lambda_{emitted}}{\lambda_{emitted}}$$ quantifies how much the wavelength of light from an object has been stretched due to the expansion of the universe. This redshift is crucial for measuring distances to faraway galaxies and understanding the rate at which the universe is expanding. The value of 'z' provides insights into the object's velocity relative to us, connecting it directly to concepts like Hubble's Law and distance measurements in cosmology.