How is the quality of a password calculated and what does it mean? While using Keepass and using it to generate random passwords, I always have noticed the "quality" section but truthfully have never known what it actually means.



So my questions are; 


How much entropy is enough?
How much is overkill?
How does entropy actually apply to the length of time it may take for an attacker to guess a password?
How is entropy calculated and how may my addition of a new character affect the number of bits?
What is the theoretical max?


Thanks!
How much entropy is enough?


For a password, something around truly 96-bits of entropy is enough. After all password usually go through some slow password hashing which increases the work load for attacks significantly. And even with a super-fast verification function 96-bit should be just out of reach of attackers.


  How much is overkill?


Going above 500-bit is very likely to be overkill, even for an actually imperfect source of entropy. If your entropy is "true" (ie what is reported would actually be the entropy), then there's literally no point in going beyond 256-bit and maybe even 192-bit.


  How does entropy actually apply to the length of time it may take for
  an attacker to guess a password?


Entropy denotes the uncertainity in a string1 and is measured logarithmically in bits. So if you increase the entropy by one, the string is twice as uncertain and thus can take twice as many values which means an attacker has to try twice the amount of passwords. Shortly put: Let $l$ be the actual entropy (in bits), then there are $2^l$ possible different values to be tried.


  How is entropy calculated and how may my addition of a new character
  affect the number of bits?


What I strongly suspect this tool to be doing is to analyze the character set used in your password, looking for common words in a dictionary and then making its guess for the entropy (try this by comparing the entropy of potat with potato, the latter being reported at 12 bits and the former at 20). The upper bound for the entropy is $$\leq{|\Sigma|}^n$$ where $\Sigma$ is the alphabet / group of characters that the tool estimates could appear in your password and $n$ is the length of the password. For example if you use upper-case it's gonna include those as opposed to excluding them if you don't have an upper-case letter.
Note that what the tool reports is an estimate at best and the actual entropy can be significantly lower due to a bad RNG being used, an implementation flaw or you simply having bad luck and hitting a string that's more easily guessed / guessed sooner by an attacker.


  What is the theoretical max?


Theoretically there's none. Practically it's limited by the size of your RAM probably (because the password has to fit in there).



1Actually the uncertainity in a random variable, but that's details here.