From the help | FAQ
I just won a game. Why has my rating gone down?
The rating calculation (see below) means that until you complete 20 games (i.e. while you still have a provisional rating), it is possible for your rating to go down even when you win a game.
How is my rating calculated?
When you join, you are given a rating of 1200.
If you enter into a rated game, your rating will be recalculated on its completion so long as at least two moves have been made by each player.
Note: Until you have completed 20 games your rating may go down even when you win a game!
Until you complete 20 games, you will have a provisional rating. This rating is calculated as the average of all the games you have played. Each game is scored as being your opponent's rating (for a draw), your opponent's rating plus 400 (for a win), or your opponent's rating minus 400 (for a loss). If your opponent is also on a provisional rating, then the 400s above become 200s. If your opponent has played fewer than five games then their rating is treated as 1200 when calculating your rating.
Players are rated using the following formula:
New Rating = Old Rating + K * (Score - Win Expectancy)
K is a constant (32 for 0-2099, 24 for 2100-2399, 16 for 2400 and above)
Score is 1 for a win, 0.5 for a draw and 0 for a loss.
The Win Expectancy is calculated using the following formula :
Win Expectancy = 1 / (10^((OpponentRating-YourRating)/400)+1)
The Win Expectancy is used in the rating calculation but is interesting on its own. For example, the calculation below is for a rating difference of 200. This shows that if you have a rating 200 points higher than another player, you can expect to beat them, on average, three times for each four games played.
Win Expectancy = 1 / (10^(-200/400)+1) = 0.76
Note: ^ = "to the power of", e.g. 2^3=8.
If you have a non-provisional rating and you play a provisional-rated player, then you receive (or lose) only half the number of rating points you would normally. If the provisionally-rated player has played fewer than five games, then their rating is treated as 1200 when calculating your rating.