Actually the hardwood gardes are:
FAS (first and seconds)
1F / Select (one Face, FAS one side, #1 the other side)
#1
#2
#3
Assuming your working with good grade saw logs and flat sawing. To a sawyer FAS is usally first and seconds flat cuts off each face of the log, after the opening cut so it's usally the first and second boards to fall off the log on each of the four log faces. Larger diamater logs may actually yeild 3 and 4 FAS boards off each face, but it's not common.
F1 or select is usally boards 3 and 4 off each log face. Sometimes 5th, 6th and 7th cuts on a big diamater logs, if the log can stand it.
#1 common comes more of the center of the log, usally has a few knots from when the tree was young and had lots of branches. As the tree grows, it drops it's banches and gains height, the dropped banches are healed over and new wood grows over the knots. This newer growth is the good stuff (F1 and FAS), #1 common is where a sawyer usally yeilds most of his Board Footage from a log, hence the reason it's called common.
#2 comes from closer to the center of the tree or a bad grade saw log. It depends on how crowded the tree was when if was a sapling in the forest - if there are lots of knots and defect, it goes to make pallets. Very few forest trees around here produce this grade, something really has to be wrong, although it's very common that yard trees make this grade.
#3 is full of defect should not be put on a saw mill as it's a waste of time and the wood is really only good for firewood.
Take a look at this Black Walnut growing in the forest, note it has no branches till it crotched about 60 above the butt. This is a good grade forest saw log tree. Your be hard pressed to find a tree of this grade growing in someones yard. I Love being in a hardwood forest like this you never know what you'll find.
http://www.ncwoodworker.net/forums/attachment.php?attachmentid=2701&d=1174512888
Keep in mind de-grade can be caused by drying also, someone who isn't able to control max moisture content loss per day in a kiln, can do some real damage to wood and create a pile of junk pretty easy. Kiln drying is a whole nother ball game and quarter sawing is another story...