When My Little Pony toys are described as bait, it means that they have flaws beyond what may be able to be fixed and are generally best used for a customization project, play, spare parts, or just sentimental value. They are not in suitable condition for collectors.
There are different opinions on just what makes a pony "bait," but the ponies we have described this way are those that have permanent pen marks or writing in visible areas, splits, cracks or chew marks in the plastic, missing or severely cut manes and tails, or other visible and permanent damage.
Bait ponies can be a good way to start collecting on a budget and can be just fine for play use to keep little hands off of rare and collectible ponies. Customizers often look for bait ponies and make them into completely new ponies.