While these are a good guide, it generally isn't a wise idea to judge an item's worth purely by its color. The item color system was substantially devalued during The Burning Crusade expansion, with epics becoming excessively plentiful, and rares (a.k.a. "blues") often actually being more useful items.
Aside from set bonuses, one of the primary defining characteristics of epics is that they tend to offer bonuses to a larger number of different stats, than do blues or greens (uncommon items). Therefore, although in order to ensure that your character has balanced stats, it is usually a good idea to go for epics whenever they are available, there may be times when blues will offer a larger amount of a single stat, and depending on what you're doing, for a few pieces at least, that may be more useful (for example, agility in the case of a survival hunter).
Poor Quality (Grey)
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.
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 WoW, 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.
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 .)
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 Quality (White)
Most common 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 items cannot be disenchanted.
Shirts are an exception. Shirts are cosmetic, and there is a market for them. These are usually overproduced by tailors, driving the price down.
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.
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 Quality (Green)
Uncommon 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.
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 epic items primarily for ego gratification reasons, the fact that Epics 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 Quality (Blue)
Rare quality can also be referred to as superior quality. Like Uncommon items, Rare items generally come from world drops, drops from instance bosses, are crafted by a profession in high level crafting recipes, or are awarded by a high level quest.
- 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, so take care when rolling for them; make sure you can even use the item you are rolling on, and if you cannot use the item, or if the stats are a poor match for your class, pass on the item.
It is not too difficult to acquire rare quality items if you have a plan. Be realistic. Some items can be farmed, some can't. Rare quality PvP gear is within anyone's reach. Plan to do quests that yield rare quality gear that you need. Run instances, farm the bosses that can be easily reached and drop items you can use.
Epic Quality (Purple)
Epic quality items are quite rare and in general have much better bonuses than other items of their required level. Epic items also usually have some sort of passive or on-use effect attached to them or some kind of proc. Like rare items, there are a few BoE world drop epics. Most BoP epic items are found in raid instances, end bosses in heroic mode instances or top level recipes for tradeskills.
In the top level end game, not only do characters replace all of their rare quality gear with epic quality gear, but epic quality gear is tiered so that top level characters continue to have something to strive for.
Legendary Quality (Orange)
Legendary items, such as , and Shadowmourne, are a step up from epic items and are truly exceptional. These items are extremely rare and very few people have them. 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 Quality (Light Gold)
Artifact quality items are a step above Legendary. They are objects of unimaginable power and are also not yet implemented (for player characters, at least). It has been speculated Frostmourne and Book of Medivh will be an artifact. Artifact items are speculated to end up being "Unique" per server.
With the recent introduction of heirloom 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 Quality (Light Gold)
This section concerns content exclusive to Wrath of the Lich King.
Heirloom 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).
At the present, it is not possible to trade or mail heirloom items across linked Battle.net accounts.
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 rare or epic 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.