Planets in exaltation (like planets in their own signs) are highly dignified - basically they have power to act - to play their function in your chart. Thus, for example, Mercury in Virgo should give you a sharp mind sith good analytical and communicative skills - more so because Mercury also rules Virgo.
The extent that you can employ the strength of a dignified planet depends on where it is situated in your chart. This is known as accidental dignity, whereas exaltation and rulership are types of essential dignity. If your Mercury were angular (first, tenth, seventh, fourth) then you should find you are very able to express the power of the planet. However, there are also accidental debilties, if your planet is in the sixth, eighth or twelfth houses it will be more difficult to express/articulate. If it is retrograde or badly aspected, your ability to articulate that planet's principles will also diminish.
So you could end up, using our Mercury example, with a powerful mind but few opportunities to actually employ it to its full extent.
It's not fully clear where the exaltations come from, they seem less systematic than the rulerships and early Astrologers seem to have confined exaltation to one degree of the sign rather than the later practice of giving the whole sign to exaltation. It's also not clear whether they were originally a rival system to the rulerships or were always part of a system of dignities.
