The following is a link to an explanation of the idea of Avatars, from the book Externalization of the Hierarchy, by Alice Bailey. Here is an excerpt, which defines avatar according to the author:
[font=Verdana, Arial, Helvetica]An Avatar is a Being Who - having first developed His Own nature, human and divine, and then transcended it - is capable of reflecting some cosmic Principle or divine quality and energy which will produce the desired effect upon humanity, evoking a reaction, producing a needed stimulation and, as it is esoterically called, 'leading to the rending of a veil and the permeation of light.' This energy may be generated within the human family and focused in a responsive Messenger; it may be generated within the planet itself and produce a planetary Avatar; it may be the expression of the life impulse and energy of the solar system, or of sources outside the solar system and therefore cosmic. But always it is focused through a manifesting Entity, is called forth by a demand or massed appeal, and evokes response and consequent changes in the life activity, the culture and the civilization of mankind.This definition is broad enough to account for the fact, as explained on the next page (for anyone who reads the article), that avatars can embody evil as well as good - speaking from the Human perspective. I think it's far better to focus on avatars that embody Divine Good, since these more directly assist us with our journey toward Liberation/Salvation.
Examples given include Luther, Columbus, Shakespeare, Leonardo da Vinci, and Abraham Lincoln. Teaching avatars include Plato, Patanjali, and Shankaracharya. Ray Avatars are greater still, but Christ and Buddha belong to a group called Transmitting Avatars - coming for Humanity as a whole, and transmitting Cosmic Principles (such as Love, and Wisdom, respectively).
Divine embodiments are the greatest of all, and do not descend below the mental plane, or world of ideas (vide Plato's `World of Forms/Ideals'). Such appearances are exceedingly rare, according to Alice Bailey, but one is present in our world today. To relate this being to another thread - on evolution/creation - consider another quote from Alice Bailey's writings:
[font=Verdana, Arial, Helvetica]Thousands of those great cycles which we call "a hundred years of Brahma" have passed since They [Cosmic Avatars] approximated the human stage ...The cycle mentioned is a Solar System, viewed by esotericists as the literal incarnation of the very great Being we call God (also called The Logos). And once upon a time, said Avatars walked the earth (their `earth'), as Humans. Their evolutionary stature, then, is far beyond our ability even to begin to appreciate. But this additional statement is food for thought:
[font=Verdana, Arial, Helvetica]They have achieved all that man can conceive of as the transcendence of will, of love and of intelligence [the Trinity], and in the synthesis of those three have added qualities and vibrations for which we have no terms, and which cannot be visioned by even our highest adepts. ... [/font][font=Verdana, Arial, Helvetica]Only once has such a Being visited our system [at its inception]. [/font][font=Verdana, Arial, Helvetica]The effect of such a visit as that of the Avatar from Sirius is seen as the sumtotal of civilization and culture, viewing these from the standpoint of the entire system and in one flash of time. [emphasis added]Ummm, wow.