The idea behind the PBP system is that players can gather activity points (called PBPs here, but they are nothing else than good ol' PAL points), and later trade these points for ships. This system is similar, but not identical, to the system implemented in HOST.
When this system is used, players must decide which ships are important to them, and mark these as priority builds. This is done by giving the associated starbase a PBn friendly code. Each player can designate up to 9 priority builds this way (because there are nine PBn fcodes. If you use one code twice, only one of them is accepted, so don't do that). PB1 is most important, PB2 second-most, etc. Unlike in the other build queue modes, you must keep the PBn codes on your bases until your ship was built.
When there is a free ship slot to fill, the player with the most PBPs can perform his most important build order. If he has no priority build (or all his priority builds were already performed), or his PBPs do not suffice to do the build (see below), tough luck: then, the player with second-most PBPs is allowed to fill that slot. And so on. When no priority build can be performed, ships are built in FIFO order -- oldest build order first.
Building ships costs PBPs, the heavier the ship, the more PBPs it costs. The PBPCostPer100KT option defines how many PBPs you need to build a 100 kt ship. There is a minimum cost, however: PBPMinimumCost. If the build order was a clone order, it costs even more PBPs; the PBPCloneCostRate can be used to scale this up.
For example, let's assume you want to build a 150 kt ship, and the configuration uses the default values:
PBPCostPer100KT = 200 PBPMinimumCost = 400 PBPCloneCostRate = 200
According to PBPCostPer100KT, the cost would be 150*200% = 300 points. Since the minimum cost is 400, you'd have to pay 400 points for building that ship. If that build order were a clone order, it would cost even twice as much.
Note that PHost doesn't force you to do a priority build. If you have most PBPs in your game, but do not use a PBn friendly code, you keep accumulating points (for a really huge battleship, maybe). In contrast, HOST forces you to do a priority build in this case.