The mid price is the midpoint between the best bid and best ask. It serves as the working estimate of fair value, the anchor for limit pricing, and the reference against which fill quality is measured: distance from mid at fill is the concession paid.
The mid's authority degrades with quote width: in a tight market it approximates fair value well, in a wide one it is the midpoint of two guesses. This is why implied volatilities, and everything computed from them, inherit quote quality, and why simulators that fill at mid systematically flatter results, the gap examined in paper trading.