I would assume ΔL and ΔR are counts reported by the left and right side encoders.
To understand the formula you may want to look at this example:
We have a robot of width “l” that turns around some point which is “r” inches away from it. Let say over the time unit “t” left wheel encoder reports 3 counts (travel distance) and the right wheel reports 5.
If you know the width between the wheels then you can calculate both the unknown radius “r” and angle “theta”.
The movement of the robot is the sum of translation of center of the robot along some path and the rotation of the robot body around that point.
Special case would be when the robot only rotates around the point between its wheels.