The SIR/SMR is used to determine if the occurrence of a disease (or the mortality by a disease) in a relatively small population is high or low. An SIR analysis can tell us if the number of observed cases in a particular geographic area is higher or lower than expected, given the population and age distribution for that community.
The SIR / SMR is obtained by dividing the observed number of cases by the "expected" number of cases. The expected number is the number of cases that would occur in a community if the disease rate in a larger reference population (usually the state or country) occurred in that community. The SIR / SMR takes into account whether a community's population is older or younger than the reference population.