The typical application for this is to measure the emitted light level of an transmitter, or the power going into a receiver.
When doing this, remember that if the transmitter is modulated at 50% duty cycle, the average power reading will be lower than the peak power by 50%, eg 3 dB. It is not recommended to perform power measurements on transmitters modulating slower than about 0.1 Mbaud, or inaccurate readings can result.
The power meter must be rated to measure the peak instantaneous power, or detector saturation may result in low optical power measurements.
Safety precautions must match the possible source power levels. With high power systems, this a significant issue.
The linear-to-dBm calculation method is:
dBm = 10 log ( P1 / P2 )
where P1 = measured power level ( eg in mWatts )
P2 = reference power level, which is 1 mW
More information and an Excel log/linear conversion utility available in A01