A good system to indicate signal quality has been around for some time. The three numbers below suggest signal quality, signal strength and tone quality. That last number is only for CW operations while the first two are used to evaluate both CW and SSB signals.
You will hear something similar used for PSK31 signals. In this case, the signal strength is the most interesting attribute.
During some quick contests, you will often hear voice operators giving 59 reports regardless of the actual signal quality. Some contests require the signal report as part of the exchange, but operators have grown tired of these kind of requirements so they routinely just say “you’re 59″ and move on.
R = Readability:
R 1 - Unreadable
R 2 - Barely readable, some words occasionally distinguishable
R 3 - Readable, but with considerable difficulty
R 4 - Readable with practically no difficulty
R 5 - Perfectly readable
S = Signal Strength:
S 1 - Faint signal, barely perceptible
S 2 - Very weak signal
S 3 - Weak signal
S 4 - Fair signal
S 5 - Fairly good signal
S 6 - Good signal
S 7 - Moderately strong signal
S 8 - Strong signal
S 9 - Extremely strong signal
T = CW TONE
T 1 - 50 / 60 hertz a.c., very rough & broad
T 2 - Very rough a.c., harsh & broad
T 3 - Rough a.c. tone, rectified but not filtered
T 4 - Rough note, some trace of filtering
T 5 - Filtered rectified a.c. but strongly ripple-modulated
T 6 - Filtered tone, definite trace of ripple modulation
T 7 - Near pure tone, trace of ripple modulation
T 8 - Near perfect tone, slight trace of modulation
T 9 - Pure Tone, no trace of ripple or modulation of any kind
Source: Ham Help Desk