As shown in the figure above, about 2 percent of the testosterone in the body is active. This “free testosterone” is not attached to binding proteins that would prevent it from interacting with its receptor.
About 40 percent of the body's testosterone is attached to albumin. This is a protein that can release the hormone as the need for it arises in the body. Free testosterone and testosterone attached to albumin are referred to as “bioavailable testosterone”.
In a healthy young male, about 60 percent of his testosterone is attached to sex hormone binding globulin (SHBG). Hormones bound to SHBG can't be used by the body and lose their anabolic effect. As males grow older or if illness is present, SHBG sweeps up more and more testosterone, lowering free testosterone and its benefits.
Total testosterone is the sum of bioavailable testosterone and testosterone bound to SHBG. Measuring just the total testosterone in the blood may not provide the whole picture and let you know how much “active” or usable testosterone you have.
This is a great summary article written by Lee Meyer, a man I respect greatly due to his ability to write clearly about testosterone and men's health issues. In this article, he lists approaches for lowering sex hormone binding globulin and increase free testosterone: