Softcap is a term describing the effect of a skill on the quality of a product.
Softcaps are put into effect when the quality of a product would be higher then the softcapping skill. The quality of said product will then be averaged with the softcapping skill level to get the actual final quality.
If the resulting quality of the product is lower than the softcapping skill, the quality will remain unchanged.
Example:
You are creating a Treeplanter's pot with clay of average quality 36. However, the quality of a Treeplanter's pot is softcapped by Dexterity.
Thus:
If your Dexterity >= 36
Resulting pot will be Q 36
If your Dexterity is < 36
Resulting pot will be Q (36 + Dex) /2