The point is we have to determine how to define a five-star item, a four-star one, etc. Currently, an Amazon item's star value is the average of the star values of every review. The author is saying that that's a bad way to compute the item's star value. The author would argue an item with only two reviews that are both fives should have a lower star value than an item with 400 fives and 1 four. We typically associate stars with the averaging algorithm (i.e. we define an item's star value as the average of the star values of its reviews), so it might help if we do away with the notion that each item has a star value, and just think of this as saying an item with 400 reviews of 5 stars and 1 review of 4 stars should be shown before an item that just has 2 reviews of 5 stars.
Currently, when we see an item's star value, we think of it as an indicator of the quality of the item. But if it's just the average of the star values of every review, the author would argue that we're not going to get an accurate indicator of quality. The author argues that whether the quality indicator of an item is expressed in stars or percentages, that value should be determined by the third algorithm, not the second, and that the order the items are shown in should be the result of sorting those quality indicators.