The terms “efficacy” and “efficiency” in relation to lighting are often confused.
General definition:
Efficacy: Capacity or power to produce a desired effect
Efficiency: The ratio of the output to the input of any system
While for light sources both measurements are usually in lumen/Watt, one describes the efficiency to convert (electric) power to light, without considering how well this light (wave lenghts) is received by the human eye, i.e. with some disregard to the achieved illumination.
The luminous efficacy of a light source is a measure of how well a light source produces visible light, expressed in the ratio of luminous flux emitted to power input, i.e. a measurement of the perceived illumination by the human eye.
The overall luminous efficacy of a source is the product of how well it converts energy to electromagnetic radiation (light), and how well this light is detected by the human eye.
Due to the spectral sensitivity of the human eye it is not equally sensitive to all wavelengths of light (see luminosity function explained). Radiation in the infrared and ultraviolet parts of the spectrum is useless for illumination.
Often the luminous efficacy is expressed by a luminous efficiency or luminous coefficient, as a percentage of the maximum possible efficacy, 683 lm/W. (see Photometric Units)
Since LEDs usually have a smaller spectrum, emit less UV and IR light and have no spikes in the senitive green spectrum their efficiency is sometimes not as impressive as expected, however their efficacy is much higher than conventional sources. Hence good LEDs appear brighter and provide better illumination than wattage would suggest.
Fluorescent light and HID lamps have often impressive efficiency rates, however convert much of the electricity into invisible UV light (see spectrum of different light soures). Good LEDs convert the energy in much more visible light, resulting in better illumination and, as a result, better efficacy.