AdWords started as a pure auction system where to rank higher it was basically CPC * CTR, which maximized profit in a simple way for Google and it worked well.

AdWords started as a pure auction system where to rank higher it was basically CPC * CTR, which maximized profit in a simple way for Google and it worked well. The problem is that some people are too good at getting high CTR ads, so their CPC's got too low. What Quality Score does is it adds a layer of indirection to the system where they can tweak some invisible dial so to speak to increase the "quality threshold" for ads. Google will tell you what each keywords QS is, but it's not as explicit as it could/should be as to why. The point of QS is to enable Google to maximize profit while maintaining a decent user experience, but the problem is, at any point Google can turn the knob of QS and increase their ad rates. If Google needs to make more money, they can drop QS and people will bid higher to rank higher. Or, new advertisers who aren't very good will bid the "recommended" bids of $2 or $3 per click, where in the pre-QS world, those numbers were less than $0.50 in most cases. They also can use QS to make you redesign your pages to be more what google wants, even if it doesn't increase your conversions or align with your goals. Google totally can and does dictate what kind of pages you can advertise and how you can advertise them. So it's not just a auction system. It's much more clever than that. It's more like if eBay auctions had a bidder quality rating where you would have to pay more if your bidder quality score was too low.