I'm going to hopefully give a simple explanation that helps! 

Most people use it as a way to add coats to a breed so it's usually a Paint or Appaloosa crossed with say a Dutch Warmblood. Now this foal won't be a grade but if you took that cross and breed it with a Dutch Warmblood (not another cross) it would be 75% Dutch and 25% Paint but it would not be until that 75% Dutch foal was breed with another Dutch would the foal be able to be considered a grade since they need to be 95% of a breed for the "grade" title. So you could even potentially have to breed that foal once more for a grade. 

In short: To get a grade you would need to cross a horse with another breed than take the offspring and rebreed with the breed you want atlest 2 more times before it would be a grade!