Investors want to know the risks in buying a bond before they take the plunge. Rating services measure those risks.
Junk bonds are the lowest-rated corporate bonds.
The highly-publicized mergers and acquisitions of the 1980s were financed with junk bonds. Investors were willing to take the risk because the yields were so much higher than on other, safer investments. As a bond investor, you want to be reasonably sure that you'll get your interest payments on time and your principal back at maturity. It's almost impossible for an individual to do the necessary research. But rating services make a business of it.