Conversion rate (or CR) means the ratio of downloaded compared to purchased product copies. If your game is downloaded 1000 times and purchased 10 times then your conversion rate would be 1%. (sold copies / downloads = rate). 0.5% – 1.5% rate is concidered somewhat a “shareware game industry average rate” but it’s just figure, and doesn’t really tell you what kind of rate you need to expect.
If you wonder why your game is not selling then it might be useful to count this ratio for your game. If you have sold 20 copies of your game and it has been downloaded 500 times then the conversion rate is 4%. This kind of high conversion rate would suggest that you don’t need to continue adding features, instead you need more exposure. You need to get 5000 or 50000 more people to download the game.
But if the game sold 10 copies and was downloaded 5000 times then the conversion rate would be 0.2%. This could suggest that your game is getting needed downloads but you need to improve the quality. Maybe add features, have better instructions, add “buy” buttons inside the demo etc. etc.