Grades measure how much effort you put into a course. “If a student gets an A, it shows that he or she understands the course material and has put true effort into studying, writing papers, and completing projects. However, a C indicates that a student did not do enough and maybe had no desire to get any better grade. Lower grades can motivate students to work harder; while a higher grade makes them proud of themselves for accomplishing something challenging.”

Source: http://www.helium.com/items/800287-do-grades-really-matter

Not all grades are created equal

According to Forbes, “admissions officers understand the difference between an A in an easy class and a B in a hard one. Top colleges have admissions officers who specialize in understanding the rigor of high schools in specific regions, and they are aware of which schools have grade inflation and which issue few high marks. Admissions staff generally use class rank to determine a student’s level of academic excellence, not just his grade point average.”
Source: http://www.forbes.com/2006/09/11/leadership-careers-cz_ms_0911college06_myths_slide_3.html?thisSpeed=20000

Weighted GPA

Is getting an A remedial Algebra the same as getting one in AP Calculus? Of course not! That is why some colleges use a weighted GPA in which the harder course carries more weight or more importance.

“The weighting isn’t always the same from school to school, but a typical model on a 4-point grade scale might look like this:
AP, Honors, Advanced Courses: ‘A’ (5 points); ‘B’ (4 points); ‘C’ (3 points); ‘D’ (1 point); ‘F’ (0 points)
Regular Courses: ‘A’ (4 points); ‘B’ (3 points); ‘C’ (2 points); ‘D'(1 point); ‘F’ (0 points) Thus, a student who got straight ‘A’s and took nothing but AP classes could have a 5.0 GPA on a 4-point scale. High schools will often use these weighted GPAs for determining class rank — they don’t want students to rank high just because they took easy classes. Colleges, however, usually aren’t going to use these artificially inflated grades. Yes, they want to see that a student has taken challenging courses, but they need to compare all applicants using the same 4-point grade scale. Most high schools that use weighted GPAs will also include unweighted grades on a student’s transcript, and colleges will usually use the unweighted number.”
Source: http://collegeapps.about.com/od/theartofgettingaccepted/f/weighted-gpa.htm

Take it from Harvard, where according to their FAQ section, “There is no single academic path we expect all students to follow, but the strongest applicants take the most rigorous secondary school curricula available to them. An ideal four-year preparatory program includes four years of English, with extensive practice in writing; four years of math; four years of science: biology, chemistry, physics, and an advanced course in one of these subjects; three years of history, including American and European history; and four years of one foreign language.”
Source: http://www.admissions.college.harvard.edu/apply/faq.html

When it comes specifically to grades, “The Admissions Committee recognizes that schools vary by size, academic program, and grading policies, so we do not have rigid grade requirements. There is no single academic path we expect all students to follow, but the strongest applicants take the most rigorous secondary school curricula available to them. We do seek students who achieve at a high level, and most admitted students rank in the top 10-15% of their graduating classes.”

Source: http://www.admissions.college.harvard.edu/apply/faq.html

Yale is no less strict, “What does matter in the admissions process? Yale is above all an academic institution, and thus academic strength is our first consideration in evaluating any candidate. The single most important document in the application is the high school transcript, which tells us a great deal about a student’s academic motivation and performance over time. We look for students who have consistently taken a broad range of challenging courses in high school and done well in them….While there is no hard and fast rule, it is safe to say that performance in school is relatively more important than testing [ACT or SAT]. A very strong performance in a demanding college preparatory program may compensate for modest standardized test scores, but it is unlikely that high standardized test scores will persuade the admissions committee to disregard an undistinguished secondary-school record.”

Source: http://www.yale.edu/admit/faq/applying.html

Senior Grades Matter

According to College Confidential, “One of the big mistakes that some high school seniors make is to assume that junior grades are all-important and that senior grades aren’t on the transcripts that colleges see. On the contrary, first-semester senior grades can be critical in the admission process. Even early decision candidates usually find that their first-quarter senior marks come under scrutiny.”
Source: http://www.collegeconfidential.com/dean/archives/000195.htm

While it’s true that “many high school students complete all or most of their school graduation requirements at the end of junior year and look forward to 12th grade as a time when they can indulge in some of the electives that interest them: psychology, ceramics, photography, law, etc. Unfortunately, at the most competitive colleges and universities, admission officials are apt to label such offerings as “fluff.” Never mind that some of these classes are truly challenging, and some applicants who take them will go on to earn advanced degrees and distinguish themselves professionally in these areas that they first discovered at age 18. From the all-too-exacting elite-admission point of view, physics trumps philosophy every time; calculus beats out economics. It’s always tough to tell an aspiring artist, who’s waited a dozen years to study silk-screening as a senior, that another year’s wait is in order if Ivy applications are on the line, but–in most cases–that’s the state of affairs in admissions today.”
Source: http://www.collegeconfidential.com/dean/archives/000195.htm

The Domino Effect

“The College/Graduate School Admissions Domino Effect states that there are five key steps of applying and getting accepted to the colleges or graduate schools of your choice. If you ignore any one of the steps, or do one poorly, then the likelihood of getting accepted decreases dramatically — just as if you pulled a domino out of a chain of dominos.”

The five phases of a successful college/grad school application:

• 1. Grades/G.P.A./Class Ranking
  2. Standardized Test Scores
  3. Activities/Experience
  4. Application Essay
  5. Recommendations

Source: http://www.quintcareers.com/college_domino.html

As you can see, grades is at the top of the list. “Because just about all colleges and universities use grades as part of a scoring index, if your grades are weak, you’ll need to compensate for this problem by performing at a much higher level on one or more standardized admissions tests. If there were extenuating circumstances, such as the need to support yourself or your family, a serious illness, or other life-altering event, you should be thorough in explaining the situation on your applications.”
Source: http://www.quintcareers.com/college_domino.html

So in conclusion, if your grades aren’t great, everything else will have to be.