The efficiency rating of a gas or oil heating system is a measure of how effectively it converts fuel into "useful" heat. There are three common types of "efficiency".
Combustion Efficiency tells the system's "efficiency" while it is running. Combustion efficiency is like the miles per gallon a car gets when it is cruising at a steady speed on the highway.
A more accurate estimation of fuel use is the Seasonal Efficiency rating known as the Annual Fuel Utilization Efficiency (AFUE). This is a measure of the system "efficiency" and accounts for start-up, cool-down and other operating losses that occur under "normal" operating conditions. AFUE is like your car's mileage over all kinds of driving conditions from "stop-and-go" traffic to highway driving.
The third common "efficiency" measure is Steady-State Efficiency. After the heating system has been operating for a period of time, it is said to be operating at a "steady state". The Steady-State Efficiency is the ratio of the heat actually available to the distribution system to the amount of heat potentially available in the fuel. Steady-State Efficiency can be calculated by a Flue Gas Analysis, as test that determines how much heat is being lost up the chimney.
Steady-State Efficiency takes into consideration the stack losses (heat that goes up the chimney), so it is lower than the Combustion Efficiency, but higher than AFUE, which accounts for start-up and cool-down losses. In order from highest to lowest, the efficiencies are:
Highest: Combustion because it only looks at heat produced by combustion.
Middle: Steady-State because it takes into account stack losses.
Lowest: AFUE because it accounts for start-up and cool-down losses.