All referees affiliated with FIFA have a designated referee grade. The grade indicates the qualification of the referee to officiate at various levels of local, national and international soccer competition. There is a common misconception that these grades are related to elementary or secondary school grades - they're not, they are assigned by USSF.
Grade 1 Referees: Referees who officiate in the World Cup and international matches are designated as Grade 1.
Grade 2 Referees: Assistant Referees to Grade 1 Referees are designated as Grade 2.
Grade 3 and 4 Referees: In the United States, competition at the national level (including professional soccer and MLS) requires Grade 3 or 4. Grade 3 indicates the referee's readiness to be considered for international service.
Grade 5 and 6 Referees: The highest level of competition within a state (amateur leagues beyond youth) requires a Grade 5 or 6 where Grade 5 indicates the referee's readiness to be considered for national service.
Grade 7 Referees: Grade 7 is an experienced referee in the state qualified to officiate all but the highest levels of amateur soccer.
Grade 8 Referees: Most referees begin their careers as Grade 8 having taken the entry training course.
Grade 9 Referees: Very young aspirants to refereeing may take an abbreviated training course and be registered as Grade 9 which qualifies them only for very young "small sided" matches (usually seven and eight year old players in six per team matches)
As referees advance to higher grades they are required to demonstrate their continued qualification for their grade through "maintenance" assessments and sustained high level competition experience. Each referee at Grade 7 or higher is also required to successfully pass a physical fitness field examination which includes distance, agility and speed tests (as set out in the Referee Administrative handbook). The results of this testing are recorded to fulfill part of the annual registration / recertification qualifications. In rare circumstances referees who fail to maintain their qualifications are "down graded" and this is reflected on their next registration.