Quality Settings
Introduction
The Plex quality settings can be a little unintuitive. With picking the right version the answer was easy:
Lower Quality Version = Better Streaming
Once you have picked your version this is not necessarily true! Once you are streaming, you usually see a quality option (it will differ visually between platforms) similar to this:
Anywhere you install or run Plex will default to 720p at 2Mbps. Changing this option, and preferably changing the default option can help you a lot! Before explaining what you should change it too there is an important thing to understand, which is: Transcoding.
Transcoding
When you transcode a file, basically it changes from one form to another. For example, you can change the resolution to be lower, or change the audio to be compatible with what you are listening on. This is a bit of an oversimplification, but the key part to all this is that transcoding can be difficult. Whenever someone transcodes a file, the server (a computer) has to process these changes, and the bigger the file, and the more people transcoding, the harder it has to work. At a certain point the server can't keep up with demand, and you (and others) start to buffer as the server struggles to keep up. you can read more about transcoding here.
Factors
With that out of the way, the option you should pick depends on a few factors. Firstly, your internet speed. If your internet speed is slow, you are going to be the limiting factor. The other limiting factors is the servers ability to transcode, and *its* internet speed.
Generally speaking, the servers internet speed is not the problem, it is generally good enough that something else presents a problem first.
It is also impossible for you to know whether other people are transcoding or not, but what you can do is try to stream in a way that *you* aren't transcoding. This is called "Direct Playing" or "Direct Streaming"
Direct PlayPlay/Stream
[TODO]If your internet is fast enough, and the device you are playing back on is compatible, you can Direct Play. If your device only needs to make minor changes to playback the file you can Direct Stream. Without getting into the weeds on exactly what these two things mean, the important part is that the Plex (server won't have to transcode, and as long as your internet can keep up, this will probably result in much smoother streaming (and better quality) than trying to transcode to a lower quality. You can read more about Direct Play/Stream here.
TL,DR:
If your internet is good, try setting your quality to Maximum or Original Quality. If your internet is not good, picking the right version and set your quality to Automatic, or try progressively lower options.