Quality

All items found in World of Warcraft are given a quality rating that is defined by the item's text color.

For equipment, the quality determines the relationship of the item level (which determines the sizes of the stat bonuses on it) to the required level to equip it. It also determines the number of different stat bonuses: in general, a common or poor item has no stat bonuses, an uncommon item has one or two, and a rare or better item has two, three or four. (A few exceptions exist, such as The 1 Ring which is uncommon and has five stats.)

Poor (grey)
quality items only drop from mobs or similar looting, such as chests; they are never sold by vendors (except buy-back), are never crafted by professions, and very rarely awarded by quests.

Poor quality pieces of equipment will generally have a minimum level to be able to be equipped, but the benefits that come from them are usually less than those of better quality items, even of a slightly a lower level. For example, poor quality weapons and armor have no stat bonuses.

Poor quality items cannot be disenchanted.

Poor quality equipment typically does not bind, and has the advantage that it can be used, then traded. However, poor quality weapons and armor sell slowly at auction and have a high listing fee. Even when a poor quality item has comparable stats to a Common quality item, often buyers will pass it by due to the stigma of 'poor quality'. You will probably find that you are better off vending these items.

If you are just starting World of Warcraft, from level 1 through about level 10, poor quality gear that drops is pretty good. In these levels, mobs drop poor quality gear, and bosses drop common quality gear that is only slightly better. Check the gear you find and compare the relevant numbers. Some Poor quality drops may be better than some of the common quality gear you are using. (compare and ) Another example,  and  both drop in the Solliden Farmstead pumpkin field in Tirisfal Glades; it's a toss-up which one is better.

From level 1, you will be looking for frayed and unkempt cloth armor, ragged and scraggy leather armor, and flimsy mail armor.

Around level six, when you've just left your beginning area and are starting your village, you will be looking for patchwork cloth armor, worn leather armor, and loose mail armor.

For the average non-twink the lowest level shoulder items appear at level 15 and 16, and are typically Poor quality. These are in demand, and can sell for gold on the auction house. Blacksmiths and tailors can craft Common quality and  level 17 shoulders, so the demand drops off fast. (Note that much better shoulders can be obtained through instances at these levels. The is a quest reward from an quest item found on the end boss in The Wailing Caverns;  in Shadowfang Keep is farmable for his .)

One particularly important poor quality item, Noboru's Cudgel, starts a quest.

Useless items dropped by mobs, also known as salvage items, "vendor junk", or "vendor trash" (VT), are Poor quality items and are good for one thing and one thing only: to sell to a vendor. This does not mean they are worthless, since some Poor quality items can sell for a decent amount of money (at level 70 some items can sell for several gold).

Common (white)
Most quality items are either used for professions, spell reagents, quest items, consumables, equipment items bought from a vendor or awarded by a low level quest, or are crafted by a profession in the earlier crafting recipes.

Common quality weapons and armor usually have no stat bonuses and don't drop from mobs.

Common quality items cannot be disenchanted.

Common quality mob drops and purchased items typically do not bind, and have the advantage that they can be used, then traded. Common quality quest awards are typically Bind on Pickup.

Common quality weapons and armor sell slowly at auction and have a high listing fee. You will probably find that you are better off vending these items. There is a good market for many common crafting materials. For example, most cloth can be sold at the Auction House for much more than vendors will pay. Shirts are an exception. Shirts are cosmetic, and there is a market for them. These are usually overproduced by tailors, driving the price down. Common shoulder items for level 17 can be sold. Common head items in the low 20s can be sold. These are usually overproduced by crafters, driving the price down.

Since common quality gear items are less restricted by binding than better quality items, some common quality equipment items are more valuable than their 'better' counterparts. Bags in particular have this, and some vendor wands may be better than their Uncommon quality counterparts.

An item that a trade skill enchantment is enchanted on should usually be a low level common or poor quality cloth item (typically a glove). This is so any character can use the item and so that it does not bind. The exception is when there is a specific item that has the same skill bonus, because then you want to cast on that item so the bonuses stack. (Some folks may prefer the enchantment on a Bind on Equip glove they can't accidentally give away.)

Functionally for the player, grey and white quality items are similar; grey has somewhat lower stats, but neither have bonuses, neither bind (except for quest awards), neither can be disenchanted. White parts items are used in something; in a recipe or for a quest; grey parts items are generally not useful anywhere except to sell to a vendor.

From level 1, you will be receiving Common quality gear from quests. Some white items will drop, especially from low level bosses. Buying a white item from a vendor for a slight upgrade from a grey is not warranted; only upgrade if you get a substantial stat boost, especially in weapon dps. By all means, craft anything for yourself that you can use if you have the profession to do so. Uncommon quality gear becomes increasingly available though the teen levels, and you should be phasing out your whites.

Trivia: the most absolutely useless items in the game are white, not grey - excess quest items. Many quest items have no vendor value, cannot be auctioned, and can only be used within the context of the quest. It is often possible to acquire an excess of these items beyond what the quest requires. If the dropped item has to be transformed, additional drops can be acquired after the transformation, before the turn-in. The excess is useless and can only be kept or destroyed. Examples: the Dwarven mining tools in Mulgore that have to be destroyed for, and the necklace worn by the furbolg chief in eastern Teldrassil from which you have to remove a gem for. Also, if a spawned mob can drop the item, you may have an extra one drop. Example: in the Draenei quest, you can net your last needed red snapper, have a murloc spawn, and have another red snapper drop - and it's not even edible, nor will your hunter pet eat it.

Uncommon (green)
items are usually random world drops, with an overall drop rate between 1% and 10% of kills, are crafted by a profession in mid range crafting recipes, or are awarded by a mid level quest. Jewelcrafters have the ability to produce Uncommon quality rings as soon as they receive apprentice training.

Uncommon equipment is usually Bind on Equip, though items dropped from bosses or awarded by quests will generally Bind on Pickup.

Most Uncommon quality equipment items can be disenchanted, though there are some exceptions)

It's a good idea to sell unused uncommon items at the auction house instead of to vendors, or disenchant them for enchanting reagents.

The primary difference between uncommon items and items of higher quality is that Uncommon items generally only include bonuses to one or two different stats. Itemization for most classes these days is fairly complex, and it's not uncommon to need around four-six different stat types. (say, Agility, Stamina, Intellect, AP, crit rating, and hit rating for Hunters)

Although most people usually want items primarily for ego gratification reasons, the fact that  tend to offer bonuses to around four different stats, generally means that they are a far more desirable upgrade in purely objective terms, as well.

You won't see an uncommon item drop in your beginning subzone. You will probably see a few in your village level play. The first time you get one is an awesome moment. The honeymoon won't last. By the twenties levels, Uncommon items will be your bread and butter gear, and you will be striving for Rare items. Excess Uncommon items with poor stat combinations become disenchanter trash.

Rare (blue)
quality can also be referred to as quality. Rare items usually come from instances (mostly boss drops or dungeon quest rewards, with some trash drops) or are crafted by a profession in high level crafting recipes. A few are awarded by high level non-dungeon quests, usually at the end of a long quest chain. The Satchel of Helpful Goods, awarded for completing a random lower-level dungeon using the Dungeon Finder, also contains a Rare item. Rare PvP items can be bought with Honor points.
 * World drops are randomly dropped from almost any mob in the world (within a given level range) and as a result cannot be farmed; The only effective way to get your hands on one you want is to seek out another player who was lucky enough to find it (the auction house helps a lot with this). These items will usually Bind on Equip.
 * Instance drops are typically found on bosses in instances; such drops are almost always exclusive to that boss (example: the that drops off of Arcanist Doan in the Scarlet Monastery only drops off of Doan). Most of these items will Bind on Pickup, but be tradeable among players who could loot them (as long as they have not been gemmed, enchanted or reforged) for two hours after they have been looted.

Most Rare quality equipment items can be disenchanted, yielding a shard. (See exceptions)

The Dungeon Finder has made it far easier to acquire rare items while leveling.

Epic (purple)
quality items are designed to allow players to continue growing in power after they reach the level cap; thus, epic armor and weapons require the highest level that existed when they were introduced (60, 70, 80 or 85) and are tiered so that for as long as possible, players will still have something to strive for. They generally have much better bonuses than other items of their required level.

Like rare items, there are a few BoE world drop epics. Most BoP epic items are found in raid instances, or top level recipes for tradeskills. Starting with Tier 11, some PvE epics from the newest tier can be bought with Valor points, and some from previous tiers can be bought with Justice points. Epic items dropped from heroic 5-player dungeon bosses in Wrath of the Lich King, but in Cataclysm they drop rare items instead. Some epic items are sold by vendors for gold, but require exalted reputation with a specific faction.

PvP epics requiring level 85 can be bought with Conquest points or obtained as drops from Argaloth in Baradin Hold. Lower-level PvP epics can be bought with Honor points, and those from arena season 8 also drop from bosses in the Vault of Archavon.

Most quality equipment items can be disenchanted. (See exceptions)

Legendary (orange)
items, such as Sulfuras, Hand of Ragnaros, Thunderfury, Blessed Blade of the Windseeker and Shadowmourne, are a step up from epic items and are truly exceptional. Not only do they have even better stat bonuses than epic items, but they also serve pivotal roles in the game's lore. All of the equippable legendary items currently available to players are weapons, except for one shield. These items usually require the completion of a long chain of quests, as it is with, but this is not always the case.

Legendary items cannot be disenchanted.

Artifact (light gold)
quality items are a step above Legendary. They are objects of unimaginable power and are also not yet implemented (for player characters, at least). Data mining indicates that Frostmourne is an artifact; it is speculated that the Book of Medivh may become one as well. Artifact items available to players are speculated to end up being "Unique" per server.

With the recent introduction of items as light gold, the original color of artifacts as red was speculated to be reinstated, but this has yet to be reflected by the in-game API (at version 3.0.3).

Heirloom (light gold)
items are Bind to Account, allowing a player to freely mail the item to other characters on the account that reside on the same realm. Heirloom weapons, armor, and trinkets have the ability to scale to the level of the person wearing them with stats equivalent to a Rare quality item. Some scalable heirloom armor will transform into the type of armor the player is capable of wearing (for example: plate armor will temporarily transform into mail when given to a level 1 warrior).

For players who have more than one World of Warcraft account on the same Battle.net account, some heirloom items became Battle.net account bound in Patch 4.1.

Tips
Quality is an indication of how good an item is for game play, but other factors must be considered. The level of the item is important, higher is better; quality only makes up for a limited level discrepancy. The appropriateness of the buffs must be considered; there is no point to acquiring an item that has buffs that do nothing for your character class.

Blizzard often assigns qualities to limited access items to help prevent the player from accidentally throwing away an item. For example, the characteristics of companions are pretty equivalent, but Blizzard assigned a or  quality to pets that are obtainable only through a special code. You can still throw the item away, but you are more likely to notice.