Thread Count and Fabric Quality
Thread count is often considered a simple measure of fabric quality, so that "standard" cotton thread counts are around 150, while good-quality sheets start at 180 and a count of 200 or higher is considered percale, or closely woven.
Thread count in sheets can range from 80 to 700, although most stores sell sheets ranging from 180 to 320. In general, the higher the thread count, the softer the fabric feels, but that doesn't necessarily mean the sheets will last longer (and sheets with a higher thread count are usually more expensive).
Thread count is used as a measure of the coarseness or fineness of fabric. It is measured by counting the number of threads contained in one square inch of fabric, including both the length (warp) and width (weft) threads. It is used especially in regards to cotton linens such as bed sheets.
In addition to thread count, factors such as the length of the cotton staples and origin (e.g. Egyptian or Pima) should be considered. However, some materials described as "Egyptian cotton" are in fact a blend with perhaps only 1% Egyptian cotton, so it is important to that your cotton is certified by making sure the Egyptian cotton logo is present on your packaging (see this page for image of logo).
Extremely high thread counts (typically over 500) tend to be misleading as they usually use 'plied' yarns. i.e. one yarn that is made by twisting together multiple finer threads.
According to Consumer Reports, cotton and cotton-blend sheets with a thread count of 180 to 200 stand up to wear and tear and provide satisfactory comfort.
For marketing purposes, a fabric with 250 yarns in both the vertical and horizontal direction could have the component threads counted to a 1000 thread count - although according to the National Textile Association, which cites the international standards group ASTM, accepted industry practice is to count each thread as one, even threads spun with two- or three-ply yarn. The Federal Trade Commission agrees and has recently issued a warning that consumers 'could be deceived or misled' by inflated thread counts.
Sheets made of linen, flannel, or jersey (those trendy "T-shirt" sheets) have low thread counts due to the type of fabric. A high thread count would eliminate part of the appeal of these sheets.