SG is Specific Gravity. it is a comparison density RATIO of sulphuric acid to water with distilled water being the universal 1.000. The solution of the electrolyte (sulphric acid and water) at 1.275 is the full strength of the electrolyte solution. If you add more water to the solution (electrolyte), you would be diluting the solution and the SG would decrease. A low SG does not necessary mean the end of the battery. You need to charge the battery and then check the SG again. (It's like slowly pouring Irish Creme into a glass of water. If you don't stir the drink, the SG at the bottom of the glass will still be 1.000 because the cream is only at the top.) the main importance of the battery's SG is the variation between the cells. I look at SG as an indicator. So would be cell voltage readings, again variation. A Load Test or a heavy discharge test is probably more reliable.
BTW - some people tried adding fresh battery acid to an old battery to raised the SG, which it may well do, but the battery cell plates are usually so over-sulphated, it may not achieved anything. When a battery becomes oversulphated, the internal resistance goes up so that it may not accept a charge efficiently. If Resistance goes up, Amps goes down in order to maintain same voltage. Your 80 Amp alternator can put out 80 Amps, but your old battery can only accept 10 amps, between starting, lights, accessories, etc, it's a losing battle.
