They use an algorithm that is generally based on an input of effort (steps on a pedometer, distance and elevation on a treadmill, heart rate and distance for a typical running watch, etc.) and weight (generally input by the user). Any calculation will be off based on inaccuracy of the data and estimation factors inherent to the algorithm. For example, we have a pretty good estimate of how many calories a 200 lb. person burns per mile run, but a variety of factors (running form, running economy, shoes, elevation, etc.) will cause small differences from person to person.
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