A methodology used to evaluate the ability of a process to meet its Specifications (customer requirements). It helps answer the question, "Does the process do what it is supposed to do?".
There are several measures of capability, among them Sigma level, Cp, Cpk, Pp and Ppk.
For more on capability analysis, see the definitions for Process capability and the terms mentioned above.
Assessing Process Capability: - http://www.itl.nist.gov/div898/handbook/ppc/section4/ppc46.htm