Usually it involves taking one common and fixed item, like cereal, and looking at its prices over time. While there are seasonal effects, looking at the price over a number of years gives you a good picture as to the actual inflation.
The key thing here, though, is "fixed". Sometimes companies will make adjustments to the product to reduce costs, and those adjustments make the apparent inflation appear lower than they really are. For example, a jeweler can quote the same price for jewelry next year (assuming gold price rises) if they use less gold and more base metals in the jewelry. CPI measure would say that there was no change, although for all intents and purposes there was a change.
The key thing here, though, is "fixed". Sometimes companies will make adjustments to the product to reduce costs, and those adjustments make the apparent inflation appear lower than they really are. For example, a jeweler can quote the same price for jewelry next year (assuming gold price rises) if they use less gold and more base metals in the jewelry. CPI measure would say that there was no change, although for all intents and purposes there was a change.