Grades are a certain level that one aims or aspires to attain, for personal achievement or for requirements. It gives you a sound and overview of what level that you are at.
You can get A's etc, telling how well you did at this particular level and if you don't think you did satisfactorily, you could repeat.
Some people tend to choose the "skipping the grade" option. This is a risky option, although it is good for some people. However, before skipping grades, you must make certain that you are up to the level! haha
Some people also do not believe in grades anyway, but that is the other story