Poor water quality is any aquarium water that has any trace of ammonia or nitrite, or a nitrate reading above 20ppm. It can also include the wrong water chemistry (pH, GH & KH) for the species.
(eg: goldfish or mollies in a pH of 6.0)
(eg: tetras in a pH of 9.0).
GH is included in wrong water chemistry for the species but it is not usually a major contributing factor to diseases, especially if the water is hard (has lots of minerals). Bacteria and fungus generally don't do as well in hard water for some reason. I don't know why, but you get fewer bacterial and fungal infections in hard water.
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As GaryE mentioned, fin rot/ tail rot can be caused by a number of things including poor water quality (ammonia is the most common cause for it to start). Once there is damage to the skin or tissue, then bacteria and fungus can enter the wound and start an infection.
If the fish has a good immune system and the infection is dealt with by the fish, the damaged fin/ tail should heal up and not get worse.
If the fish is unable to heal itself, then bacteria, fungus or even external protozoan parasites could infect the tissue and slowly or rapidly spread. Some harmful bacteria can spread rapidly and double in number every 30 minutes. This means a fish could lose its tail in a few days. Other bacteria don't grow as fast or the fish has a partial immune response to the infection and the tail might take a week or two to erode away.
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Good water quality will help boost a fish's immune system as will the correct water chemistry (pH, GH, KH). Appropriate temperature and a good diet will help as well.
If a fish is healthy and kept in good conditions and well fed, it should be able to fight off most minor infections just like people can. Most people don't go to a doctor if they get a splinter or small cut on their finger because their immune system can repair the damage. Same with fish.
If water conditions are good but an infection has set in, and the fish's immune system can't deal with the infecting organism, then you need to treat them with something (salt of chemical medications).