Potential is a projection of how good a young player can become, as opposed to how good they are now. In GM sims it is usually shown as a ceiling rating or a grade next to the current overall.
In HoopSim every player has a ceiling, and development slows as they approach it. The ceiling is not fixed: at the end of each season it can move up, mostly for young players who grew fast, played real minutes and had a strong staff, or down, for players who stalled for several seasons, got worse while playing, or passed thirty. Once a player is in their late twenties the ceiling can only hold or fall. What you see is your scout's read of potential, a separate skill from reading current ability; some scouts are strong at one and weak at the other, and prospects need a scout assigned to them before you get any read at all.
Rulebook: Potential can change. Related: progression and regression, scouting fog, OVR.