In Pirates of the Burning Sea, there are a lot of items. In the game the relative power of items compared to each other can vary quite a bit. Because different teams make different items for different purposes. All items are assigned an item budget; this is a point value based on the level and quality of the item. All stats have a specific cost, so if add Damage to a weapon, or Dodge to a piece of armor, you have to deduct points from the item budget. These point pools help to establish common, agreed upon values for all stats so that anyone who makes a new item can easily fit their creation in with the rest of the game.
Another way in updating items in the new system is a visual one: item names! In the old system, it was often impossible to tell the relative power of an item compared to another one. What's the difference between "Heavy Cutlass, Fine" and "Gleaming Cutlass"? Now all items have a more consistent naming scheme, so it should be easy to glance at the name of two items and know if they're of a similar power.
In patch 1.7 have the Rarity as part of item descriptions, now we're adding two levels of item quality to help us further distinguish items from each other. In the past, we had three levels: Common, Uncommon, and Unique. Now five: Common, Uncommon, Exceptional, Unique, and Special.
During the item tuning, there were many items that were set as "Unique", but weren't really unique enough to warrant the Unique rarity. For example, "Steam-Launched Boarding Planks" is a unique item with interesting flavor, but other unique items, like "Teak Armor 4", don't have that same flavor to it. Now we'll call those items Exceptional. It allows us to tell you an item is "Top Tier", and more powerful than an Uncommon item, without overlapping on the more interesting items we have in the game. Soon, you'll see Unique items less often, but they'll stand out more. The Special rarity is for seasonal items, special rewards, and other items that don't fit the normal item classifications. Together these new quality levels will make your inventory more colorful and hopefully easier to use.