Alpha tries to separate "manager skill" from "market movement". If the market index rises 10% and a fund with the same market sensitivity rises 12%, those extra two points are alpha — value added by the manager's decisions rather than delivered free by the market.
The precise calculation accounts for beta (the fund's sensitivity to its index): a fund with a beta of 1.2 is already expected to beat the index in a rising market, so that gap is not counted as skill. Alpha is what remains after subtracting this expected return.
Consistently positive alpha across years is the rarest thing investors look for, because most active funds — after fees — record alpha near zero or negative. One year of alpha can be luck; what matters is persistence across multiple periods.
Always read alpha together with the benchmark used to compute it: alpha measured against an index that doesn't fit the fund's category is a meaningless number.