When mining in a pool what does current effort actually mean? Is my payout reduced when the effort goes to 500% let's say? What is different when the effort is 10% for example?

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Mining effort is just the number of submitted hashes divided by the actual difficulty. This calculation then provides how much "effort" the pool should provide to statistically find a block.

When a pool finds a block with a 500% effort, it means it took 5 times more hashes than it was "statistically" needed to find it. When a pool finds a block with a 50% effort, it means it took 2 times less hashes to find it.

As far as I know the only impact this information really has is for the PPLNS pools, this reward system is determined by proportion of your hashes in the PPLNS window of time before the moment block is found. Window of time equals to time required to reach usually 200% block effort.

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