For the unknowing, the actual formula is a^2 + b^2 = c^2. The one presented here doesn't work because if, say, a and b are both 2 (aka 2^, which is 4), then 4^2 would be 8, which it isn't. It's 16. So the formula here would basically mean that if a and b were both 2, 4+4=16. Which, you know, is incorrect. But that's the point of the joke.

Assuming that the left side of the equation is correct, the right side should read a² + 2ab + b². a² + b² = c² is most famously the Pythagorean theorem, which you use to figure out the sides of a right triangle.