I feel like, for me, it sort of depends of the avatar itself, where I am, the persons profile ect. If I'm on a roleplay sim, I tend to gravitate towards the avatars that look well put together, not necessarily expensive, but like they've really thought about what 'character' they're emulating. I'm attracted to them more I think because the effort tends to translate into their writing as well.
If I'm not on an RP sim and I'm not RPing, then my consideration of the avatar sort of changes. Does it look like they're just here for the perverted stuff? Not a bad thing, just not for me and we probably wouldn't have much to talk about. Are they purposefully making themselves look in an offensive manor? (Such as, is your avatar African American? Is it a bad, racist steryo-type? I'll probably avoid).
Am I looking for romance? Then I'm probably looking to see if I'm attracted to your avatar, but maybe not in the 'do I like your shape? is it mesh?' but more 'do we have a similar style/taste that we like?' With males, I like them taller than me, big and strong looking. Girls I love curves and girlieness and tomboyness.
I guess, in short, it kinda depends on what I'm looking for? 'Ugly' and 'Pretty' are subjective as others have said, and I do admit to seeing Avatars that just...don't look nice to me, but that doesn't mean I wont be nice and talk to someone and make friends.