How to Grade:  Look at everything about a record -- Its playing surface, its label, its edges -- under a strong light.  Then, based on your overall impression, give it a grade based on the following criteria:

    Mint (M):  Absolutely perfect in every way -- certainly never played, possibly even still sealed  (More on still sealed under "Other considerations").  Should be used sparingly as a grade, if at all.

    Near Mint (NM or M-):  A nearly perfect record.  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 45 RPM or EP sleeve should have no more than the most minor defects, such as almost invisible ring wear or other signs of slight handling.
    An LP jacket should have no creases, folds, seam splits or any other noticeable similar defect.  No cut-out holes, either.  And of course, the same should be true of any other inserts, such as posters, lyric sleeves and the like.
    Basically, an  LP in Near Mint condition looks as if you just got it home from a new record store and removed the shrink wrap.

    Very Good Plus (VG+):  A Very Good Plus record will show some signs that it was played and otherwise handled by a previous owner who took good care of it.
    Record surfaces may show some slight signs of wear and may have slight scuffs or very light scratches that don't affect one's listening experience.  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.  The center hole will not have been misshapen by repeated play.
    Picture sleeves and LP inner sleeves will have some slight ring wear, lightly turned-up corners, or a slight seam split.  An LP jacket may have slight signs of wear also and may be marred by a cut-out hole, indentation or corner indicating it was taken out of print and sold at a discount.
    In general, if not for a couple minor things wrong with it, this would be Near Mint.  All but the most mint-crazy collectors will find a Very Good Plus record highly acceptable.
    A synonym used by some collectors and dealers for "Very Good Plus" is "Excellent."

    Very Good (VG):  Many of the defects found in a VG+ record will be more pronounced in a VG disc.  Surface noise will be evident upon playing, especially in soft passages and during a song's intro and fade, but will not overpower the music otherwise.  Groove wear will start to be noticeable, as will light scratches (deep enough to feel with a fingernail) that will affect the sound.
    Labels may be marred by writing, or have tape or stickers (or their residue) attached.  The same will be true of picture sleeves or LP covers.  However, it will not have all these problems at the same time, only two or three of them.

    Good (G), Good Plus (G+):  Good does not mean Bad!  A record in Good or Good Plus condition can be put onto a turntable and will play through without skipping.  But it will have significant surface noise and scratches and visible groove wear (on a styrene record, the groove will be starting to turn white).
    A jacket or sleeve will have seam splits, especially at the bottom or on the spine.  Tape, writing, ring wear or other defects will start to overwhelm the object.
    If it's a common item, you'll probably find another copy in better shape eventually.  Pass it up.  but if it's something you have been seeking for years, and the price is right, get it... but keep looking to upgrade.

    Poor (P), Fair (F):  The record is cracked, badly warped, and won't play through without skipping or repeating.  The picture sleeve is water damaged, split on all three seams and heavily marred by wear and writing.  The LP jacket barely keeps the LP inside it.  Inner sleeves are fully seam split, crinkled, and written upon.
    Except for impossibly rare records otherwise unattainable, records in this condition should be bought or sold for no more than a few cents each.

    Other grading considerations.  Most dealers give a separate grade to the record and its sleeve or cover.  In an ad, a record's grade is listed first, followed by that of the sleeve or jacket.

    With Still Sealed (SS) records, it's safe to assume that they are in Very Good Plus to Near Mint
condition (unless there is notable damage). There are many original factory sealed records still out there (warehouses full)--just be carefull: it's easy to re-seal one. Let the buyer beware!

M-   (some dealers use N-)   A perfect, unplayed record.  I never use this grade but many dealers do.

E+   My highest grade.  A near perfect copy with no groove wear.

E     Very little groove wear and only slight signs of use.

E-    Slight groove wear and signs of handling.

E--   A little more worn than E-.

V++  Obvious signs of play and groove wear but not "beat-up".

V+   Well-played with some graying in the grooves.

V    Very well played with graying in the grooves and a fair amount of surface noise.

V-   Beat up and noisy but playable.

Lower grades include:  G+, G, G-, F and P.  These records have little surface sheen and a lot of surface noise.  P indicates a record that is completely gray and has little or no playability.

78s often have problems that are less common with LPs or 45s and should be noted.
These include:

Digs:   A dug-out part of the playing surface.  Indicate whether or not a dig "passes" that is, whether or not it causes a skip or repeat (it is assumed that most digs will cause at least some surface noise).

Lams:   Cracks in the lamination of the record; indicate whether or not these affect play and how large or long they are (or how many if you want to be really strict on grading).

Cracks:   Indicate whether or not the crack is a "hair" crack or a large crack and, of course, whether or not it affects play.

Ticks:  Indicate any "ticks" during play and how many grooves tick.

Edge chip/flake:   A chip is a piece broken off BOTH SIDES of a record; a flake is a piece broken off ONE SIDE.  Indicate whether or not the chip or flake is into the grooves or not and, if so, how many grooves and what effect it has on the playing surface.

Needle runs:   Indicate if the needle has run onto the label and caused label damage.

Skips and repeats:   Indicate any of these, of course, as well as any other defects that you would indicate when grading an LP or 45, especially SCUFFS AND SCRATCHES,  particularly for grades above V+.

For grades below V+, most buyers will assume the record has some scuffs or scratches.  If you want, you can mention whether or not the scuffs and/or scratches affect play, especially if they are very heavy.

Heat:   Note any heat damage and its effect on play, if any.   Warping should be noted separately.

DON'T BE AFRAID TO GRADE YOUR RECORDS CONSERVATIVELY!  A knowledgeable 78 buyer knows that a lot of 78s may look wretched but play relatively well and will not be as put off by a well-worn record accurately described (as he would be by a vague description like "looks good" or "looks like new").   Describe every fault the record has and let the buyer be pleasantly surprised by how conservatively you graded and how specific you were--you will be rewarded with a lot of repeat business.  Many 78 buyers spend thousands of dollars a year on their hobby and all of them appreciate conservative, accurate grading.