The equation $I = \frac{1}{2} mr^2$ defines the moment of inertia for a solid cylinder or disk about its central axis. Moment of inertia measures how difficult it is to change an object's rotational motion and depends on both the mass of the object and how that mass is distributed relative to the axis of rotation. The term $m$ represents mass, while $r$ represents the radius, indicating that as either value increases, the moment of inertia increases, thus affecting angular acceleration and dynamics.