HP can be calculated if enough is known about the variables going on inside an engine but in practise it's done by putting a variable load (Brake) while it's running at full throttle. This brake can be anything from some sort of friction device to spinning a very large water pump or even (in our case) a propellor. All the brake does is to load the engine and then the torque reaction is measured. The torque is then converted to BHP by a simple calculation.

But the point is that when you read that a certain engine has 1.5HP at whatever revs then it really means 1.5BHP.