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The quality of an item is a measure of how well it was crafted. The higher the quality of an item, the higher the item power. There are 5 quality levels currently in Albion each giving bonus item power. Each of them have a base crafting chance:

Quality Level Item Power Modifier Base Crafting Chance
Normal + 0 item power 68.8%
Good + 10 item power 25%
Outstanding + 20 item power 5%
Excellent + 50 item power 1%
Masterpiece + 100 item power 0.1%

The border or the frame of the item indicates the quality of an item. The same border appears around the info box opened by left-clicking an item. The info box

Rerolling for a chance at a higher quality item

Chance of an item being crafted with quality

Mastering the related branch on the destiny board can increase the chance of producing a higher quality item. Additionally, at repair stations you can pay silver to reroll your item for a chance to get a better item. The official base formula for rolling for quality during crafting is explained by Korn on the forums here.

Ways to increase chances of high quality