No it's not the "average quality" stat on the team comparison page. It's the average quality of your best 14 players.
My top 14 players average out at just over 77. They are all 6, 7 or 8* players. I have 5 players who are 1 and 2 * and my overall average is 69.2. So there's no advantage whatsoever holding onto these 5 crap players?