Two averages and their gap
MACD takes the difference between a faster and a slower exponential moving average of price — usually 12 and 26 periods. A 9-period average of that difference is the signal line, and the gap between the two is the histogram.
When the MACD line is above its signal line, short-term momentum has been stronger than the longer-term average; below it, weaker.
Limits
MACD is built from past prices, so it reacts after moves begin, and in sideways markets it can flip back and forth. It describes momentum; it does not forecast it.