Lets look at a sample METAR report:

METAR KDWH 020453Z COR 18508KT 10SM +TSRA BR BKN007 OVC011 08/01 A3015 RMK AO2

Now, lets break the report down:

METAR KDWH 020453Z COR 18508KT 10SM +TSRA BR BKN007 OVC011 08/01 A3015 RMK AO2
1 2 3 4 5 6 7 8 9 10 11
1 Type of Report There are two types of METAR reports. The first is the routine METAR report that is transmitted every hour. The second is the aviation selected special weather report (SPECI). This is a special report that can be given at any time to update the METAR for rapidly changing weather conditions, or other critical information. 7 Weather Weather can be broken down into two different categories: qualifiers and weather phenomenon (+TSRA BR). First, the qualifiers of intensity, proximity, and the descriptor of the weather will be given. The intensity may be light (-), moderate ( ), or heavy (+). Proximity only depicts weather phenomena that are in the airport vicinity. The notation “VC” indicates a specific weather phenomenon is in the vicinity of 5 to 10 miles from the airport. Descriptors are used to describe certain types of precipitation and obscurations. Weather phenomena may be reported as being precipitation, obscurations, and other phenomena such as squalls or funnel clouds. Descriptions of weather phenomena as they begin or end, and hailstone size are also listed in the remarks sections of the report.
2 Station Identifier Each station is identified by a four-letter code as established by the International Civil Aviation Organization (ICAO). In the 48 contiguous states, a unique three-letter identifier is preceded by the letter “K.” For example, Bush Intercontinental Airport in Houston, Texas, is identified by the letters “KIAH”, K being the country designation and IAH being the airport identifier. In other regions of the world, including Alaska and Hawaii, the first two letters of the four-letter ICAO identifier indicate the region, country,or state. Alaska identifiers always begin with the letters “PA” and Hawaii identifiers always begin with the letters “PH.” A list of station identifiers can be found at an FSS or NWS office. 8 Sky Condition Sky condition (BKN008 OVC012CB) is always reported in the sequence of amount, height, and type or indefinite ceiling/height (vertical visibility). The heights of the cloud bases are reported with a three-digit number in hundreds of feet above the ground. Clouds above 12,000 feet are not detected or reported by an automated station. The types of clouds, specifically towering cumulus (TCU) or cumulonimbus (CB) clouds, are reported with their height. Contractions are used to describe the amount of cloud coverage and obscuring phenomena. The amount of sky coverage is reported in eighths of the sky from horizon to horizon.
3 Date and
Time of Report
The date and time (161753Z) are depicted in a six-digit group. The first two digits of the six-digit group are the date. The last four digits are the time of the METAR, which is always given in Coordinated Universal Time (UTC). A “Z” is appended to the end of the time to denote the
time is given in Zulu time (UTC) as opposed to local time.
9 Temperature
and Dewpoint
The air temperature and dewpoint are always given in degrees Celsius (18/17). Temperatures below 0°C are preceded by the letter “M” to indicate minus.
4 Modifier Modifiers denote that the METAR came from an automated source or that the report was corrected. If the notation “AUTO” is listed in the METAR, the report came from an automated source. It also lists “AO1” or “AO2” in the remarks section to indicate the type of precipitation sensors employed at the automated station. When the modifier “COR” is used, it identifies a corrected report sent out to replace an earlier report that contained an error.

Example: METAR KGGG 161753Z COR

10 Altimeter Setting The altimeter setting is reported as inches of mercury in a four-digit number group (A2970). It is always preceded by the letter “A.” Rising or falling pressure may also be denoted in the remarks sections as “PRESRR” or “PRESFR” respectively.

For example:
A2970 =  29.70" Hg (barometric pressure in inches of mercury)


5 Wind Winds are reported with five digits (14021) unless the speed is greater than 99 knots, in which case the wind is reported with six digits. The first three digits indicate the direction the wind is blowing in tens of degrees. If the wind is variable, it is reported as “VRB.” The last two digits indicate the speed of the wind in knots (KT) unless the wind is greater than 99 knots, in which case it is indicated by three digits. If the winds are gusting, the letter “G” follows the windspeed (G26). After the letter “G,” the peak gust recorded is provided. If the wind varies more than 60° and the windspeed is greater than 6 knots, a separate group of numbers, separated by a “V,” will indicate the extremes of the wind directions. 11 Remarks Comments may or may not appear in this section of the METAR. The information contained in this section may include wind data, variable visibility, beginning and ending times of particular phenomenon, pressure information, and various other information deemed necessary. An example of a remark regarding weather phenomenon that does not fit in any other category would be: OCNL LTGICCG. This translates as occasional lightning in the clouds, and from cloud to ground. Automated stations also use the remarks section to indicate the equipment needs maintenance. The remarks section always begins with the letters "RMK.”
6 Visibility The prevailing visibility (3/4 SM) is reported in statute miles as denoted by the letters “SM.” It is reported in both miles and fractions of miles. At times, RVR, or runway visual range is reported following the prevailing visibility. RVR is the distance a pilot can see down the runway in a moving aircraft. When RVR is reported, it is shown with an R, then the runway number followed by a slant, then the visual range in feet. For example, when the RVR is reported as R17L/1400FT, it translates to a visual range of 1,400 feet on runway 17 left.      

Source: Pilot's Handbook of Aeronautical Knowledge