It is applied by slacking off the drill string so that part of the bottomhole assembly's weight transfers to the bit, and it is read from the change in hook load. Too little weight and the cutters do not bite. Too much and the bit can ball up, stall, or fail, and a slender assembly can buckle.
In a directional well, drag means the weight read at surface is not the weight the bit sees. A soft torque or a rotary-steerable tool has its own limits, and the useful weight is the one that drills without destroying the cutters or building an unplanned dogleg.