Formative evaluation is a type of usability evaluation that helps to "form" the design for a product or service. Formative evaluations involve evaluating a product or service during development, often iteratively, with the goal of detecting and eliminating usability problems.
One important aspect of formative evaluation is that the audience for the observations and recommendations is the project team itself, used to immediately improve the design of the product or service and refine the development specifications. Results can be less formal than in summative evaluation, as suits the needs of designers, developers, project managers, and other project participants.
Heuristic evaluation, user interface inspections, thinking-aloud testing, pluralistic usability walkthrough, and cognitive walkthrough are some methods that can be used for formative evaluation. This approach is in contrast to a Summative evaluation which can only be started when a design is reasonably complete and involves judging the design against quantitative goals or competitive products.
Note that the term "formative evaluation" originated in instructional design.