You didn't say airvideo was mirroring the iPad screen, but you did ask for a comparison between mirroring and the method you were using to display video from your PC on your TV, of which there isn't a comparison since what you are doing isn't mirroring, nor would the alternative Apple method of displaying video from your PC be mirroring either. The whole point being that I don't think this is what you are really asking.
If your source video is 1080p then there maybe no upscaling when played to the Apple TV, but there would be if your source was different and it isn't really clear from what the developers say whether you really are getting 1080p when using the app in streaming mode. Add to which conversion on the fly is difficult, if you converted these video's without the requirement to do it in real time, you'd find that conversion would likely take much longer than the length of the movie, so doing so within the length of the movie essentially introduces compromise regardless of how the developer dresses things up.
I'm inclined to think that the ambiguity used on the developers website about exactly what their product does is somewhat intentional. It leaves me thinking that whilst it leaves the impression that you are getting high quality video at 1080p that this may not be so in all cases.
However assuming for the point of comparison, it does what it implies it does then at best it is going to be the same quality that you would get from home sharing which is what you would use if you did things the way Apple intended.
So in terms of quality, it will be no more than equal to home sharing and in my estimation likely lower quality. It's main advantage appears to be that it doesn't require that you convert video in advance, but as discussed above this may compromise quality.
