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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