Here is a quick guide to vinyl record grade according to Goldmine Magazine:

Mint (M)

Absolutely perfect in every way. Certainly never been 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 cover should have no creases, folds, seam splits or other noticeable similar defects. 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.
Near Mint is the highest price listed in all Goldmine price guides. Anything that exceeds this grade, in the opinion of both buyer and seller, is worth significantly more than the highest Goldmine book value.

Very Good Plus (VG+)

Generally worth 50 percent of the Near Mint value.
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 signs of wear and may have slight scuffs or very light scratches that don't affect one's listening experiences. 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 wear, lightly turned up corners, or a slight seam split. An LP cover 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 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.

Very Good (VG)

Generally worth 25 percent of Near Mint value. 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 with 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 of these problems at the same time, only two or three of them.
Goldmine price guides with more than one price will list Very Good as the lowest price. This, not the Near Mint price, should be your guide when determining how much a record is worth, as that is the price a dealer will normally pay you for a Near Mint record.
                                                                    

  Good (G), Good Plus (G+)

Generally worth 10-15 percent of the Near Mint value. 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 cover 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.
It is 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)

 Generally worth 0-5 percent of the Near Mint price. 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 cover 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 Considerations<p>

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