It is a grad for lumber, but the more important grading is the number it will be SPF number 1 or 2. 2 is the more common grade used for construction etc. Most of your big box stores carry 2 because...
With a saw. Too simple? Once the log is stripped of the branches it is placed in a machine that rotates it and multiple blades strip off the bark. Then it is placed in the saw and one side is sliced...