I know some people don't care about grading their records, they just wanna hear it, scratchy or not, and as long as it plays through, fine. When I first started buying records I bought used records as cheaply as I could. Of course, I'd look at the record to make sure it wasn't too beat, but I had hella crappy speakers and most flaws went unheard, but not now—now I only try to buy top-condition copies since I'm a little OCD about my records and I'll get urges to REPLACE my lesser graded copy with a better copy. Um...yeah, so it's now best for me to get that top copy, like M- or EX, the first time.
Right, there are two ways to grade: visual and aurally. Visual grading can suffice in a pinch, odds are if it looks clean it will play clean. However, aurally, or rather, PLAY grading, is the only true test, 'cause some records that look clean won't play clean and visa versa. Also, the record itself isn't the only consideration that applies to the grading, the entire package counts. Okay...I've tried not to get too nerdy here, just the essential points to listen/look for...
MINT/M/NEAR MINT/NM/MINT-/M-: A record with this grade will look brand new, no matter when it was manufactured, so no spindle marks, no paper scuffs, it will have a reflective surface/gloss and should be, most likely, unplayed. The sleeve should have hard corners, no ringwear/seam splits, no foxing, and it should have complete set of inserts. Also the inner sleeve should be stock and without splits. Naturally, this grade commands top $$ and is most desirable to most record nerds. New/sealed records should, in theory, represent this grade.
EXCELLENT/EX/VERY GOOD+(+)/VG+(+): Records with this grade have been played/handled/stored very carefully and should only show paper scuffs and a few spindle marks, and there should be ZERO lessening of sound reproduction. The sleeves should have hard-ish corners, little ringwear, no seam splits, foxing is forgiven, and the package should be complete with inserts. Cut out punch holes at this grade are also forgiven.
VERY GOOD/VG: Very Good means a worn record, with some ticks, pops, CUE BURNS...some scratches/scuffs, but the music should still be heard, mostly, over any noise. The sleeves might have bent corners/ringwear/short seam splits, no inserts, and/or may have been written upon. This is, maybe, the most typical of grades as most records were bought to play, therefore the amount of wear and tear.
VERY GOOD-/VG-: This is the grade of PARTY RECORDS, most original Funkadelic albums are found in this grade, or any records a kid got their hands on. Kids is also prolly why most early Beatles LPs, '60s issues, are always in this shape. Expect a worn record with ticks, pops, crackling and hiss, lots of scratches/scuffs...but even with those problems it should be an okay play copy as it SHOULD play through all the way, no skips!! The sleeves will be worn with ringwear/seam splits, writing...I'd also apply water damage to this grade.
GOOD/G: This grade is for beat to shit records, the grooves are gray from play/grime, and are perhaps even cracked, or will not play through without skipping...and the sleeve? What sleeve?
FAIR/POOR: A record that should be considered for the trash, UNLESS it is SOOOOO rare that it can be considered "one of a few known copies."
So, if you care, there you go, a bit of a starting point, or perhaps an end point.