Hay should be free of mold. It should be leafy with fine stems, as well as soft and pliable to the touch. Increased stem thickness often indicates older plants that have less digestible content. Color is least important. The outer portion of the bale should be bright green or yellow while the inside portions should be bright green. The hay should not be brown. A brown color often indicates heat damage from high moisture content. Your nose is a good quality indicator. Hay should smell fresh and fragrant. If it doesn't it may be lacking essential vitamins, including Vitamin A and E.
For more information, please read the article Eating Lots of Hay is Vital to Your Horse.