A pattern is usually developed and fitted in one sample size. Grading creates the other sizes from it using grade rules: how much the chest, length, sleeve, shoulder and other points change from one size to the next. The result appears in the tech pack as a size spec chart, with a tolerance for each measurement.
Grading is where fit consistency is won or lost. Uneven increments can make small sizes boxy or large sizes short, and some points, such as the neck opening, should not grow at the same rate as body width. Extended sizes often need their own grade rules rather than simply continuing the pattern.
On cut and sew, ask for a size set (one sample of each size) before production and measure each piece against the spec chart. In printing, the word also describes graded artwork, where a print is scaled for different garment sizes. See tech packs and sampling and fit rounds.