What do the numbers in the output of apt-cache policy tell us?

$ apt-cache policy pal
pal:
  Installed: 0.4.3-8
  Candidate: 0.4.3-8
  Version table:
 *** 0.4.3-8 0
        500 http://in.archive.ubuntu.com/ubuntu/ quantal/universe i386 Packages
        100 /var/lib/dpkg/status

In the above output what is the meaning of 500 & 100.

Guiding me through the information obtained in this Debian HOWTO article I can say that it represents the priority of the repository package. In the previous link you can see an example.

While the number representing the priority is bigger, the priority for this repo is bigger.

After the "Version table:" line you have this format:

*** <some-version> <minimum-priority-to-consider>
   <priority-of-this-instance> <repository1>
   <priority-of-this-instance> <repository2>
*** <some-other-version> <minimum-priority-to-consider>
   <priority-of-this-instance> <repository3>
   <priority-of-this-instance> <repository4>

So in your output, for the version 0.4.3-8, the minimum priority to consider is 0 (zero). And the first mentioned repository has a big priority (500 is the greatest number there)

A version pin does NOT set a priority; it kicks in when any version exists anywhere that matches the version initializing the version that is going to be installed or upgraded, and then replacing that version with any version anywhere that has a larger priority than the requested version Pin-Priority, if any.