Many educators are skeptics when it comes to grades.
The idea that a single piece of ordinal information adequately describes student performance over a semester is on the face of it somewhat ludicrous. The most charitable explanation for using the common grading process is that it allows us to avoid an information glut. Grading is usually seen as mixed formative and summative evaluation where formative evaluation is feedback and summative evaluation is, as the phrase implies, a summing up of performance. The grades given at the end of the semester are at best terse as either formative or summative information, but are probably most defensible as some sort of summative measure of central tendency. This discussion is chiefly concerned with the first question.