To ascertain the difference between "good" and "bad" knights in Le Morte D'Arthur, we must look at the standard knights were measured by during Arthur's time. This standard is referred to as the medieval code of chivalry. Today, we think of chivalry as courteous behavior, but in Sir Thomas Malory's time (and in Arthur's as well), chivalry constituted specific behaviors that substantiated a knight's loyalty to his king.
For example, you may have noticed that Sir Thomas Malory includes considerable examples of martial prowess in his story. This, by itself, is no accident. A chivalrous knight is a battle-ready warrior at all times, especially in service for his lord. Thus, characters such as Sir Launcelot, Sir Lamorak, and Sir Tristam exemplify the qualities of "good" knights when they engage in violent conflict against the king's enemies. Valor in service of the king constitutes service to God, an honorable work for a chivalrous knight.
Additionally, "good" knights are expected to have descended from great or noble families. In the book, Sir Launcelot expects that Sir Gareth Beaumains should be "of great blood" to deserve the privilege of knighthood. Indeed, some historians claim that Sir Malory himself was a knight from the lower nobility.
Despite this definition of the "good" knight, however, the corruptible influence of courtly love soon turned many a virtuous knight into a "bad" knight in Sir Malory's time. By the 15th century, the French concept of chivalry had utterly upended the chivalric code of conduct in English courts. One can conclude that the French corruption of the English chivalric code led to knights like Sir Launcelot and Sir Gawain losing their way as they navigated the treacherous waters between loyalties.
In the book, Launcelot struggles to reconcile his allegiance to his king with his loyalty to his lovers. As a knight of the new (French-influenced) chivalric order, Launcelot is impeccable in his veneration of women. Additionally, he is a force to be reckoned with in any jousting tournament:
When Sir Launcelot saw his party go to the worst he thrang into the thickest press with a sword in his hand; and there he smote down on the right hand and on the left hand, and pulled down knights and raced off their helms, that all men had wonder that ever one knight might do such deeds of arms.
Within the French tradition, the glamor and accoutrements of warfare are considerably worshiped. Thus, in any tournament, the "good knight" must concentrate on impressing favored ladies in the audience rather than to focus on the intricacies of savage warfare.
This new principle of impressing beautiful women soon leads "good" knights like Sir Launcelot to commit acts incompatible with the Christian tradition of chivalry. In the story, Sir Launcelot falls in love with Guinevere (or Gwenyvere), Arthur's queen, and by all indications, commits adultery. In the meantime, Mordred (King Arthur's illegitimate son) and Sir Agravain (one of Sir Gawain's brothers) plot to capture Launcelot and Guinevere in the heat of passionate love.
The two knights (with twelve additional knightly companions) corner Launcelot in the queen's bedchamber and demand that he surrender to them. Launcelot refuses and proceeds to kill every knight except Mordred, who manages to escape. He begs the queen to run away with him, but she is hesitant. Eventually, Guinevere is sentenced to be burned at the stake for her adulterous relationship with Launcelot. Despite this verdict, the knight-errant manages to save Guinevere and to bring her to his castle.
In Sir Launcelot, we see the interplay between the "good" knight and the "bad" knight persona. The dichotomy of the "good" and "bad" knightly attributes exemplify the conflict between the French and English chivalric codes. Essentially, no knight in Sir Malory's story can reconcile to any sort of acceptable degree the demands of the Christian chivalric code and the demands of courtly, adulterous love. For more, please refer to the links below.