it is directly connected with Market (not ) profile, or TPO charts.
1) takes a rolling window of, for example, 50 data points of close prices:
2) for each of this closing prices, the algorithm will check how many bars touched this close price.
3) then: sum of datapoints * weights/sum of weights
Since the logic is implemented in pretty non-efficient way, the script sometimes can take time to make calculations. Moreover, it calculates the centroid taking into account only close prices, not every tick. of a given rolling window That's why it's still experimental.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.