What is the difference between good quality chocolate and cheap chocolate?

The short answer is that good quality chocolate has a high proportion of cocoa constituents with little or no substitution.

What to look for:

1. High cocoa solids content. Chocolate with less than 50% cocoa solids will have little real chocolate taste and those with more than 70% will have a much more complex and fine chocolate taste.
2. Cocoa butter content. Chocolate makers tend to substitute vegetable oil in place of cocoa butter to reduce costs. Cocoa butter prices have increased in recent years due to demand in the cosmetics industry.
3. Smooth texture. This comes from the cocoa spending a longer period being crushed in the concher.

Conversely, these are indications of a poor quality chocolate:

• Low proportion of cocoa solids
• Use of vegetable oil instead of cocoa butter

Chocolates with low cocoa solids content, such as milk chocolate, are usually inappropriate for baking due to their proportionally low chocolate flavor. Baking cocoa powder itself is in fact just another word for cocoa solids, and this is why it is favored when baking: it is the pure chocolate flavor.

The milk constituents of milk chocolate may also go rancid, giving the chocolate a'bad olive oil' taste as described here.

In this image the cocoa solids go up from 0% in white chocolate to a maximum of 100% in the highest of quality chocolates.

As white chocolate contains no cocoa solids, look instead for cocoa butter and vanilla in place of vegetable oils and vanilla extract.

I'd really suggest you read the wikipedia on chocolate processing as a starting point. http://en.wikipedia.org/wiki/Chocolate#Processing

There are many steps involved, and each one is important.

A summary of things that can go wrong:

1. Under-ripe beans
2. Improper fermentation. (many factors can contribute to this)
3. over/under roasting
4. Improper cleaning (foreign particles)
5. Poor conching (smoothing and grinding of particles)
6. Poor tempering (crystal structure)

5 and 6 go more to texture. You may find mass market Easter chocolate has a grainy texture -- That's poor conching.

Then the recipe has to be taken into account as well. Cocoa butter has value outside of chocolate making, and it may be replaced with cheaper oils (Hydrogenated coconut or palm oils for example.)

The cocoa solids themselves may be adulterated with cheaper ingredients to stretch the yield. And the mass producer's favorite weapon is more sugar. If you make it sweet enough, a lot of people won't notice the low quality product.

I'd recommend that you go out and buy a Lindt 70% cocoa bar and give it a taste. While not necessarily the best chocolate out there, it is readily available, and of a decent quality.