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From The PSUPedia
Star rarity is the measurement of the rate at which an item is dropped by enemies or breakable objects in missions. An item with more stars drops less frequently than an item with fewer stars.
Items with seven or more stars are considered a rare item for determining item distribution in a party. Additionally, the stars on items will be illuminated in different colors based on their rarity.
|Star rarity||Star color||Relevant rank|
Star rating update
Many things were changed in the expansion pack for Phantasy Star Universe, one of which was the visuals for different star rarities.
The stars are now more grouped together. Whereas before when all stars were the same color as the relevant rank (see the image above), the different color for each rank (C, B, A, S) is shown.
A good example for this is a nine-star A rank weapon. The stars would go: 1★-3★ dark blue, 4★-6★ light blue, 7★-9★ green.
This new change makes it easier to identify an items rank and star rating.