As far as I know, it's just a visual indicator to estimate reputation, but as you've already noticed, it's not too accurate.
Someone with a lower positive rep of, let's say 35 has the same amount of green squares as a member with 500 rep points.
There are 5 dark green squares followed by 6 lighter green ones.
Here is a list of sayings, or "quotes" associated with each of the green squares; these were copied from another thread
-Link-, the post was from member "OrionBLF"
1) X is infamous around these parts (1 red bar);
2) X is an unknown quantity at this point (1/0 green bar);
3) X is on a distinguished road (1/0 green bar);
4) X will become famous soon enough (1-2/0 green bars);
5) X has a spectacular aura about (2-3/0 green bars);
6) X is a jewel in the rough (3-4/0 green bars);
7) X is just really nice (4-5/0 green bars);
8) X is a glorious beacon of light (5/0 green bars);
9) X is a name known to all (5/0-1 green bars);
10) X is a splendid one to behold (5/1-3 green bars);
11) X has much to be proud of (5/3-5 green bars);
12) X has a brilliant future (5/5-6 green bars);
13) X has a reputation beyond repute (5/6 green bars).