Coin grading, as Kathy Mullen mentioned in “Introduction to Coin Grading”, is the process of determining the grade or condition of a coin, and it’s one of the key factors in determining coin values as a collector's item. The appearance of a coin can be broken down into several key components – strike, surface preservation, luster, coloration, and eye appeal – and then the grade is assigned accordingly based on the overall quality of the piece.
Coin grading has evolved along with the coin collecting hobby over hundreds of years. The earliest systems simply used a one- or two-word description or a letter grade to describe a coin’s condition. Later William H. Sheldon developed a numerical grade scale of 1-70, and although it was originally intended for large cents, collectors found that the system translated well for any type of coin. The current system of grading in the United States combines the letter grade and numerical grade, ranging from a PR-01 (poor coin with an identifiable date) to MS-70 (perfect uncirculated) for regular business strike coins. The system, which is credited to the American Numismatic Association, is detailed in James L. Halperin’s How to Grade U.S. Coins.