In the United States, the USDA operates a voluntary beef grading program. The meat processor pays for a trained USDA meat grader to grade whole carcass. The carcass grade is bean stamped on each primal cut (six stamps) and applied with roller stamp to each side as well. Traces of the USDA grading stamp are sometimes visible on boxed primal cuts.

The grades are based on two main criteria: the degree of marbling (intramuscular fat) in the beef rib eye (at the 12th rib cross-section), and the age of the animal prior to slaughter. Some meat scientists object to the current scheme of USDA grading since it does not take tenderness into account. Most other countries’ beef grading systems mirror the US model. Most beef offered for sale in supermarkets is graded choice or select. Prime beef is sold to hotels and upscale restaurants. Beef that would rate as Standard or leaner is almost never offered for grading.

Inspected carcasses tagged by the USDA:
Prime – Highest in quality and intra-muscular fat. Currently, only four percent of cuts sold are USDA certified Prime.
Choice – High quality, widely available in food service industry and retail markets.
Select – Leanest grade commonly sold, acceptable quality but less juicy and tender.
Standard – Lower quality yet economical, lacking marbling.
Commercial – Low quality, lacking tenderness, produced from older animals.
Utility
Cutter
Canner

Utility, Cutter, and Canner grades are rarely used in food service operations. Typically used by processors and canners.

Traditionally, beef sold in steakhouses and supermarkets has been advertised by its USDA grading; however, many restaurants and retailers have recently begun advertising beef on the strength of brand names and the reputation of a specific breed of cattle, such as Black Angus.

Information provided by http://en.wikipedia.org/wiki/Beef#References