The real yearly return on savings, including the effect of compounding.
APY expresses how much a deposit actually earns in a year once compounding is included, which makes it the fair way to compare savings accounts and CDs. It is always equal to or higher than the stated nominal interest rate. For borrowing, the comparable measure is APR.
A 4.9% APY earns slightly more over a year than a 4.9% simple rate, because interest compounds.