Quality Score is a dynamic variable assigned to each of your keywords. It's calculated using a variety of factors and measures how relevant your keyword is to your ad text and to a user's search query, according to Google.
About Quality Score
Quality Score influences your ads' position on Google. It also partly determines your keywords' minimum bids. In general, the higher your Quality Score, the better your ad position and the lower your minimum bids.
Quality Score helps ensure that only the most relevant ads appear to users on Google and the Google Network. The AdWords system works best for everybody—advertisers, users, publishers, and Google too—when the ads we display match our users' needs as closely as possible. Relevant ads tend to earn more clicks, appear in a higher position, and bring you the most success.
For calculating a keyword's minimum bid (PPC only, not content network or content targeted ads):
- The keyword's historical click-through rate on Google
- The relevance of the keyword to the ads in its ad group
- The quality of your landing page
- Your account history, which is measured by the CTR of all the ads and keywords in your account
- Other relevance factors***
Unfortunately, that is all Google will tell us, partly to avoid people gaming the system and partly to be less accountable. The ability to control earnings this way (in my estimation) will keep Google (and Yahoo in their shadow) from ever completely erasing the veil.
All we can do is play by the rules and put ourselves in the best position to pay the least for the desired position. This includes rotating ads, writing the most direct ad, and having the site back both of those points us with our "call to action", or what we are looking to have the user/searcher do. This must be done clearly, easily and within the top fold of the landing page.