Words per minute, or WPM, is the number of words typed in a minute. A word is defined as five characters, and space counts as a character, meaning that "of it" counts as one word just like "nitro" counts as one word. WPM is calculated by dividing the total number of words by the fractional amount of minutes typed.
However, your WPM does not increase by using a nitro, and it can even decrease your speed by 1-3 WPM.
WPM increases as you type words, but decreases as you mistype a word. Practice is recommended so that you mistype words fewer and fewer times.
For example, let's say you type for exactly 2 minutes and type 810 characters. 810 characters divided by 5 characters per word is 161, meaning that you typed 161 words in that time period. 161 words divided by 2 minutes is 80.5, meaning that you typed 80.5 WPM.
You can also measure WPM over a shorter period of time, like 20 seconds. If you typed for 20 seconds and typed 185 characters (37 words), then you can divide 37 words by 1/3 minutes and get 111 WPM. Here is the simple formula to calculate your WPM:
(characters typed / 5) / (seconds typed / 60) = Words per Minute, or WPM.
The highest WPM anyone has ever obtained without cheating is chak’s high speed of 229 WPM.
You also go against other racers that have similar "WPM" as you. That is because it is fair. It is so you are not racing people that go 120 wpm when you average 50.
Fun Fact: The world average typing speed is 38-40 WPM! (source: livechatinc.com)