Grading System:

Mint (M)

Absolutely perfect in every way. Certainly never been played, possibly even still sealed. Should be used sparingly as a grade, if at all. 

Near Mint (NM or M-)

A nearly perfect record. A NM or M- record has more than likely never been played. Many dealers won't give a grade higher than this implying (perhaps correctly) that no record is ever truly perfect. The record should show no obvious signs of wear. A sleeve should have no more than the most minor defects, such as any sign of slight handling. A cover should have no creases, folds, seam splits, cut-out holes, or other noticeable similar defects. The same should be true of any other inserts, such as posters, lyric sleeves, etc

Very Good Plus (VG+) 

Defects should be more of a cosmetic nature, not affecting the actual playback as a whole. Record surfaces may show some signs of wear and may have slight scuffs or very light scratches. Slight warps that do not affect the sound are "OK". The label may have some ring wear or discoloration, but it should be barely noticeable. Spindle marks may be present. Picture sleeves and inner sleeves will have some slight wear, slightly turned-up corners, or a slight seam split. A cover may have slight signs of wear, and may be marred by a cut-out hole, indentation, or cut corner. In general, if not for a couple of minor things wrong with it, this would be Near Mint. 

Very Good (VG) 

Groove wear will start to be noticeable, as with light scratches (deep enough to feel with a fingernail). Labels may be marred by writing, or have tape or stickers (or their residue) attached. The same will be true of picture sleeves or covers. However, it will not have all of these problems at the same time.

Good (G), Good Plus (G+) 

A record in Good or Good will have scratches and visible groove wear. A cover or sleeve will have seam splits, especially at the bottom or on the spine. Tape, writing, ring wear, or other defects will be present.

Poor (P), Fair (F)

The record is cracked, badly warped. The picture sleeve is water damaged, split on all three seams and heavily marred by wear and writing. The LP cover barely keeps the LP inside it. Inner sleeves are fully split, crinkled, and written upon.