The market approach assumes the market is relatively efficient in valuing assets and attempts to discern how the market would value a company 'similar' to the company in question. This approach is widely used in real estate whereby to determine the value of your house you look at the prices at which similar houses have sold per square foot. The real trick to using this method is making sure that the asset in the market is truly similar to the asset in question. Market multiples are basically ratios which relate value to some economic benefit or measure of economic performance. In real estate we would talk about price per square foot.
Price is the numerator, while square feet is the denominator.
Which economic measure we use depends on the context of the problem. As discussed above, the real trick in using the market multiple method is making sure that the asset in the market for which you can determine a value is truly comparable to the asset in question. In real estate, you would want to make sure the houses for which you have sales prices are located in the same neighborhood as yours and have roughly the same features. We can often use the word 'quality' to sum up the comparability issue. To apply the market multiple approach the first step is to find a sample of publicly traded, comparable companies.