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A damage meter is a type of AddOn which calculates total damage done to a target in real time and in most cases, the damage done over some amount of time. Since many advanced meters also include options to measure other stats (threat, heals over time, dispels etc.) they can be useful tools in evaluating characters since they account for an individual's play style and utility role rather than just mechanical stats.
They may also be used in parties, especially raids, to determine if players are under-performing to the point they are causing issues to overall progress; a group may then choose to pass coveted items to an otherwise decent player or kick a otherwise discretely lazy player tagging along for easy loot.
Nevertheless, over-reliance on damage meters as a measure of performance is controversial, especially in group play. It is generally good etiquette to not spam meter output into party chat unless asked, as it may create the worry DPSers are solely worried about their damage output rather than the welfare of the group, the nature of specific battles, or any alternate roles. This opinion is especially strong among tanks and healers, who are generally only concerned with DPS inasmuch as the amount of threat it produces.
Several popular meters are available including Recount, Minnastats, and Skada. All three meters record damage in nearly the same way from the combat log data, however Recount and Minnastats record time differently from Skada. Skada records time from the start of combat to the end, whereas Recount and Minnastats record only the time a character spent doing damage. Both methods are subject to misleading artifacts of reported dps. Specifically, when time spent causing damage is used as the dps denominator (Recount), a character could cast a single, high-damage, aoe spell and sit down for the rest of a 10-minute boss fight and successfully top the dps meter, while ranking at the bottom of the total damage meter. Using this example, the same player would rank at the bottom of both meters as displayed by Skada (which instead uses total time in combat as the dps denominator). Conversely, a very well geared/skilled player who plays a utility role for part of a raid (like crowd control or dispels), will report a very low dps on meters which use time in combat as the denominator (Skada), but will report a more informative dps value on meters that use time spent causing damage as the denominator (Recount).