The following article is from John's April 2012 Controllers Corner.

I’ve been asked to comment on how the climb is calculated for a course – and in looking at that it is also useful to consider the distance of courses.
Here is what the OA rules have to say about distance for foot orienteering events:
The course lengths shall be given as the length of the straight line from the start via the controls to the finish deviating for, and only for, physically impassable obstructions (high fences, lakes, impassable cliffs etc.), prohibited areas and marked routes.

So OK – the red line gives the distance except where there is something to force a major deviation which must then be added to the distance. This is becoming more necessary in sprint events where deviations of route choice around buildings etc. can in fact add significantly to (the shorter)course length.
In contrast, for MTBO events, the distance is calculated as the preferred / optimum route (usually discussed and agreed on by the Course Planner and the Controller).
One small point is that the distance is from the start triangle. The actual distance from the start where you pick up your map and your timing starts to the actual start triangle is not in fact included in the distance but can affect your time (especially if there is some distance to the triangle).
For climb, according to the rules the total climb shall be given as the climb in metres along the shortest sensible route and also the total climb of a course should normally not exceed 4% of the length of the shortest sensible route.
So here climb is measured according to what the Course Planner deems to be the most optimum (sensible) route for the course. Of course that route may not be every competitors preferred route, so the climb given is only an indication of what to expect. As well, the suggestion of 4% maximum climb is only a guideline – it is not a set rule, and there are certainly some areas (such as Mt Pearson) where it can be difficult to set courses of less than 4% climb.
Climb is significant for both the Course Planner and the competitor. The Course Planner is working to the guidelines of a winning time for courses (not distance), so the more climb, the slower the running speed and this has to be allowed for by reducing course length. For the runner, an age-old guide to energy expended when walking or running is that 100 m of climb is equivalent to walking or running 1 km. I recall reading fairly recently (but can’t remember where) that this holds pretty well for female competitors, while for males, the energy expended is probably more like 800 metres of distance for every 100m of climb.