A price index, such as the CPI, or a broad measure of import prices (denominated in the currency of the importer), would be put on the left-hand side of the equation, as a dependent variable, with the exchange rate and other control variables on the right-hand side, as explanatory variables.
Using this formula, researchers expected to observe a coefficient on the exchange rate somewhere between zero and 1. A value of 1 would represent complete pass-through, while a value of zero would indicate no pass-through.