The units-of-output depreciation method is based on the assumption an asset will produce a fixed number of units over its lifetime. The loss in value of the asset (depreciation expense) during an accounting period is directly related to the output of the asset in that same accounting period.
Depreciation is an accounting method of cost allocation. It is used to allocate the cost of an asset over its useful life. It's also referred to as a non-cash expense because the cash used to buy the asset left the company when it was purchased. Depreciation allows the cost of a balance sheet item (an asset) to flow smoothly to the income statement (an expense) over its serviceable life.