Groups are measured from center to center. Since you can't find the EXACT center of a group. You measure outside to outside at the farthest point. Then you subtract the caliber. Example: Let's say you shout 5 shots. You take the target home and grab your dial calipers and the two holes that are the farthest apart, measure 1.25 inches, and your shooting a .308 or 30-06. You subtract the caliber from this for your group size. 1.25-.308=.942 Your group size is .942, under 1 inch and subminute of angle.
What if you were shooting a .50 bmg, and you shot 5 shots into one hole. EXACTLY one hole. You would measure .50 and subtract .50 and give you a PERFECT group of 0.