Combat Rating:

A player's combat rating is measured by looking at the stats/makeup of the best equipment for each 'slot' that the player owns. This includes items that are equipped, in the player's inventory, and in the player's bank.

Combat rating is used by a number of advanced Alerts, Raids and Duos as a minimum requirement to sign up for/enter into the encounter. Some instances also have Mark of Victory eligibility Combat Rating requirements.  There are also a number of teleporters for specific regions (ex: Central City) that have a minimum combat rating required for players to activate/enter.  

The DC Universe Online In-game Team can not edit, or otherwise provide specifics on why a character's combat level is what it is: the team does not see the internal mathematics involved in the computation.