When Portia says, "the quality of mercy is not strain'd; it
droppeth as the gentle rain from heaven on the place beneath," she
means that you cannot force someone to be merciful. It has to be a
free act. She says in her previous line "Then must the Jew be
merciful" to which Shylock retorts, "On what compulsion must I?
Tell me that." His retort is justified; Portia had no business
using the word "must". And she admits it with this famous line.
"The quality of mercy" here means the same thing as "the nature of
mercy"; its quality is its character.