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Challenge Rating is a measure of how difficult an individual monster, a trap, or challenge (quest) is. In PnP, the difference between these CRs and the party level is supposed to determine the experience reward of the encounter.
CR is determined by a number of factors - ability to dish damage, ability to absorb damage, and even factors like an ooze's ability to damage your weapon. Since CR is an "average difficulty", it can only be used a baseline of a creature's danger level. A character running around with Muckbane is going to find oozes to be little challenge, whereas the fighter with an expensive weapon that breaks finds the CR to be well justified.