V.N is the dot product of two vectors V & N (View prob stands for Vertex, N for Normal).
The dot product is the cos of the angle between the two vectors. look up on wikipedia or something.
The formula wants these two vectors as unit vectors(their length = 1.0). When you take the dot product of two unit vectors the result will lie between the range of -1.0 and 1.0.
The formula (1 + V.N)/2 is to bring this end result into a range of 0.0 to 1.0.