Formation energy (in eV/atom) is the energy change when a compound is formed from its constituent elements in their standard states (e.g., metallic iron, O2 gas, graphite for carbon).
Formation energy alone does not tell you if a compound is the most stable phase at its composition. The energy above hull (Ehull) compares against ALL known competing phases, making it a better stability indicator. A material can have a very negative formation energy but still be above the hull if a more stable phase exists at the same composition.