If you read the in-game manual it will explain. There are three arrows that can appear by your drivers name; a green one shows he's ready and neither on form or off, a yellow arrow pointing down shows he's off form, a blue arrow pointing up shows he's on form. This changes after a few B-Spec races.
I have heard that your driver will reach a certain level in his skills and start losing them. Then you can retire them and get a new driver. I don't know if that's true.