The are talking about how at an 'auction' one is given a 'paddle' (like in the Ping-Pong game) with a number on its face. When one wants to bid on an item, they indicate by holding up their paddle. The higher you hold it up in the air above your head the more enthusiatic you are about wanting the item. So, now Michel says she has excellant arm raise which means she can do a good job of raising her paddle and Lorelai responds with 'That is what is says on the bathroom wall' this means that it is 'common knowledge'. That everybody knows this because it is written in the public toilet on the wall ('bathroom' is the phrase Americans use for the toilet). There is a great deal of implication in this statement; there is 'double meaning'. The phrase is usually used to imply something sexual such as Michel's arm raise might be good for other things... A form of 'rude' humor common in American made 'sitcoms'

Oh! and the word you are looking for is 'quote' - wish you the best with your English! Kind Regards