Principal English Translation: 

derivational suffix for adding an abstract quality, forming abstract nouns; much like –ness, -hood, and -ship in English

Frances Karttunen: 

-YŌ derivational suffix forming abstract nouns –ness, -hood, -ship / se hacen nombres abstractos (C) This suffix is pervasive in Nahuatl. In addition to its sense of ‘abstract quality,’ it is used with many possessed nouns to indicate inalienable possession; NAC(A)-TL ‘flesh,’ NONAC ‘my flesh, meat’ (from the marked, for the table), NONACAYŌ ‘the flesh of my body’ (Cf.82r). Membership in the class of nouns that take- YŌ in the possessed form is arbitrary and extends to nonliteral cases such as TĒUC-TLI ‘lord,’ NOTĒUCYŌ ~ NOTĒCUIYŌ ‘my lord, my lordship.’ The Y assimilates to preceding L and Z to produce such forms as YŌLLŌ-TL ‘heart, life, spirit’ < YOL-YŌ and MAHUIZZŌ-TL ‘honor’ < MAHUIZ-YŌ. Derivations with -YŌ take the absolutive sufflix -TL. See -YOH.
Frances Karttunen, An Analytical Dictionary of Nahuatl (Norman: University of Oklahoma Press, 1992), 339.

Attestations from sources in English: 

This suffix also functions something like the suffix "-ity" (e.g. purity) in English. We find -yo added to noun stems, and it adds a meaning of:
(1) an abstract quality (like 'beauty' or 'goodness') or
(2) a group or collection (collective nouns like 'humanity') or
(3) the material manifestation of the abstract notion (like 'a beauty' meaning a 'beautiful person or thing')
This suffix represents what was originally -yōtl or -ōtl, with a long vowel and the absolutive (-tl). But in the possessed form, having dropped the -tl, the vowel becomes short.
The -yo ending can add an element of politeness: e.g. notēucyo, totēucyo, my lord, our lord. We also see totēucyōhuan, our lords (with the vowel becoming long again, as it is no longer position final with the plural ending that follows).
Michel Launey, An Introduction to Classical Nahuatl, translated and adapted by Christopher MacKay (Cambridge: Cambridge University Press, 2011), 97.