Ok, I am not an expert, but here is what I gleaned. Having pet quality puppies does NOT mean a BYB. Even champion parents don't always produce puppies that meet the standards for shows. So, ethical breeders try to improve the breed by breeding dogs that have been proven and health tested, but not every litter contains "perfect" dogs. So, breeders sell them as pet quality. You are still getting a good dog that comes from healthy, well structured parents, but the pet quality dog might have some fault that makes him/her less than a champion. (Just like kids-- They can be adorable and healthy, but they may not have that "look" to make them models.)
While all I wanted was a healthy, happy dog, a show person might have rejected Scarlett because she had a little pink on her nose. Other than that, she might meet all of the standards for the show ring. The thing you want to avoid is a breeder who will sell you the SAME dog at different prices if you want to breed it. I mean, if the dog has faults, you don't breed it if you want to improve the breed. I had to sign a strict spay contract with Scarlett, but I still got a health guarantee and saw that her parents had been health tested etc.
A breeder/show person would pay more for a dog with breeding rights because it had the potential to be a champion. My breeder said a breeder had waited over a year for a show dog from him because some litters just don't produce dogs that have that potential although the parents are well bred and good tempered. So, a dog either has faults or it doesn't. You shouldn't be allowed to breed a dog with faults just because you pay more for it, and a puppy with potential sometimes doesn't grow up to be a champion, but show people pay more to get a dog with potential if a breeder is willing to give it up. Some breeders will not give up a puppy as a pet for several months until they can tell whether or not they are going to turn out.
Breeders who truly love the breed will spay dogs with health issues or bad temperaments and not breed them even if they are gorgeous dogs because they are trying to eradicate some of the health issues in the dog. Likewise, if a puppy doesn't meet the show standards, most breeders will make you sign a spay contract. By doing this, they improve the breed. Hope this helps.