Velocity can be defined as a measurement of how much the Scrum team can get done in a Sprint, based on past results. In this article, Beth Macy discusses how reliable is velocity and how you can use it.
He starts by defining that “If a team is kept intact for approximately three months and on the same project for that period of time, then its velocity will stabilize within a range and be predictable for the duration of the project.” There are many factors that impact velocity like the size of the Scrum team, the project complexity or an uninvolved product owner. Then he discusses how you can use team and individual velocity. His conclusion is that team and individual velocity are useful metrics. However, they should be used with caution and only for the good of the team and the project.
Read the complete article on http://www.scrumalliance.org/community/articles/2013/2013-april/how-should-we-use-velocity