Numismatists use the Sheldon Scale to grade coins.

Poor-1 or P-1 (Poor) - The type is barely discernable, but little else, due to the coin being badly damaged or worn smooth.

Fair-2 or FR-2 (Fair) - Type and date are barely discernable, but otherwise the coin is damaged or extremely worn.

AG-3 (About Good) - Type and date are discernable, although some spots may be worn out. Some lettering should be apparent, if not necessarily readable.

G-4 (Good) - Major devices and features are evident as outlines. although the coin overall is heavily worn.

G-6 (Good-plus) - Coin has a full rim plus major devices and features are clearly outlined. Heavy wear.    

VG-8 (Very Good) - Full rim with clearly discernable devices and features. Most legends are readable clearly, but the whole coin is still significantly worn.

F-12 (Fine) - Distinct rim, all legends readable, clear devices showing some detail, but the whole coin is moderately, but evenly worn.

VF-20 (Very Fine) - Clearly readable but lightly worn legends, devices show good detail, rims are clean, but the whole coin shows moderate wear on the high points and a little wear below.

VF-30 (Good Very Fine) - Legends are clear, devices show all detail with little wear; high points are lightly worn.

EF-40 (Extremely Fine) - Legends are sharp, devices are clear with slight but obvious wear on the high points.

XF-45 (Choice Extremely Fine) - Legends and devices are clear and sharp, with slight wear on the high points, and great eye appeal.    

AU-50 (About Uncirculated) - Sharp legends and devices show only a trace of wear on the highest points. There must be some remaining mint luster.

AU-55 (Good About Uncirculated) - Sharp legends and devices show only a hint of wear on the high points. Remaining mint luster must be at least half; great eye appeal.

AU-58 (Choice About Uncirculated) - Virtually uncirculated, except for minor wear marks on high points. Nearly all mint luster must be present, and must have outstanding eye appeal.

MS-60 (Mint State Basal) - Coins in this grade are ugly, dinged-up, bag-marked, ill-toned specimens, but they are in mint-condition and free of any wear.

The grades from MS-60 to MS-70, as well as the Proof designations, are all based primarily on eye-appeal, quality of luster and/or toning, and the presence or absence of contact marks, hairlines, etc. All coins of MS60 and higher are Mint State coins.

It is worth noting that proof is not a grade, but a type of coin.