I have seen many different discussions about coin grading from British and American publications. My key observation is this: the theory and practice of grading are not completely in alignment.
There is a human tendency for one to want his or her coin to be better. It is quite natural to assign a higher grade to your coin than to that belonging to Fred Bloggs. In my experience, to use numismatic terms, overgrading is common, proper grading is scarce and undergrading is very rare.
You may refer to just about any book in my bibliography to find the general definitions of coin grading. I am only interested in the simple categories. I leave MS-60, MS-61...MS-70 to those who have more time on their hands.
I am in the process of developing a large photograde database, starting with obverses. In the meantime, here is a sampling of grades and grading tips.
FDC - usually refers to a proof coin which has never been touched or come into contact with a hard surface. Perfect in every way, with full, blazing lustre.
1970 Penny, FDC
Gem Uncirculated - a virtually perfect coin, about FDC. Is virtually free of contact marks and has full lustre.
Choice Uncirculated - a practically perfect coin with some minor bag marks. Much lustre or good toning is required.
Uncirculated (UNC) - a coin with no wear whatsoever. There may be substantial bag marks. Lustre is not a requirement.
1902 Florin, UNC
About Uncirculated (AU) or good Extremely Fine (gEF) - one side of the coin may have no wear at all. There is only the slightest trace of wear at the highest points. Typically, photographs and scans will not show this high point wear, which is usually seen only under 10x-30x magnification.
Extremely Fine (EF or XF) - a trace of wear on the highest parts of the coin. May have much or even almost full lustre. "Shopworn" coins are frequently overgraded as UNC when in fact they should be assigned EF. Scans and photographs may flatter such coins and make them look higher grade than they actually are, such as in the example below, which is most assuredly EF.
Very Fine (VF) - some wear noted on the high parts but still very collectible. It is pretty easy to spot this grade from a picture or scan.
Fine (F) - substantial wear on high points, but some detail still noticeable, such as hair or crown. Collectible in most cases.
Fair/poor (Pr) - details completely worn; date legible, some lettering still readable. Not collectible unless a rare specimen is being considered. My favorite term for this grade is "junk."