Effective Level is based on the SP value for your build. SP values are compared among all other dots at that position. Highest SP value of your position? Higher EL.
SP value is based on how many SP's it would take to get your attributes (SA's don't count, EQ points don't count, % bonuses don't count, Veteran Abilities don't count), to where they are.
The main driver of SP value is ALG's, so obviously a dot that works it's majors more will have higher SP value, while one working minors, or attributes with no ALG's will have it lower assuming.
Here's an example of why it's mostly useless.
http://glb.warriorgeneral.com/game/player.pl?player_id=1947716Notice, he traded all of his BT's for SP's. Notice he trained all of his attributes with no ALG's during the most gainful training area 8-28. Remember stamina is a major on STOP's, so he made it his primary attribute. Even though it didn't help his performance as much it still gave the same boost to his SP value.