Olive Oil - Grades
In Europe we use the following categories for olive oils suitable for consumption. Only Categories I and II can have additional regional labels.
Category I - Extra Virgin: 1. cold press, acidity (oleic acid): 0,8%, highest quality and fine taste, also labelled as Vierge Extra, Extra Vergine, Virgen Extra, Extra Virgem
Category II - Virgin or Fine: like catgory I but higher acidity: < 2%, good quality, fine taste, also labelled Vierge, Fine Vierge, Vergine, Virgen, Virgem
Category III - Semi-Fine: like category II but higher accidity: > 2%, decent quality, taste still acceptable, also labelled as Vierge Courante
Category IV - Olive Oil: Mix between refined (98%) and semi-virgin (2%) olive oil, generally has oily taste, but good for frying and sautéing, labbelled Huile d'Olive, Olio di Oliva, Aceite de Oliva, Azeite de Oliva
The less acid an oil contains, the higher the quality. Oleic acid (in French: l'acide oléique) is normally classified from 0.5% to 4%. Today olive oils are chosen by professional tasters who judge the bouquet, texture and flavour, just like wine.
There is a simple rule: whenever you use olive oil to enhance the taste of a dish, use category I - III, depending on availability and how much money you are willing to spend. Any recipe asking for olive oil to be drizzled, dripped or used in a marinade calls for extra virgin olive oil. Never ever use category VI to make a salad dressing - you are better off making a yogurt based dressing. On the other side it's a waste of money to use category I - III olive oil for frying or sautéing.
The International Olive Oil Council (IOOC), an intergovernmental organization based in Madrid, defines the quality standards. In the US, thanks to the almighty industrial food lobby, the IOOC standards have not been implemented. Don't rely on the USDA's classification, which is confusing and misleading: Fancy (Grade A), Choice (Grade B), Standard (Grade C) and Substandard (Grade D). Anyone can use the label "Extra Virgin Olive Oil" without impunity, it has no legal meaning. But you can go to the California Olive Oil Council (COOC) website, their grades follow pretty much the IOOC rules.
You find more background information here.