Apparently the news of the week is that the letter grade "A" is now the most common. Mark Perry has more on college grade inflation.
I am actually a fan of the grading system at Harvard Business School when I was there. 15% of the students in each course get the top grade (category I) -- no more, no less. 10% get the bottom grade (category III) -- again by rule, no more and no less. All the rest are in the middle. It effectively acknowledges that for most folks, the point is to demonstrate you have satisfactorily learned the course material, while still allowing folks to distinguish themselves on both ends. Budding young executives who complain that it is unfair to automatically "fail" the bottom 10% of each course are reminded that this is exactly how many Fortune 500 companies run their HR systems, seeking to constantly weed out the bottom 10%.
Update: The argument usually is that students need high grades to compete with other kids from grade-inflated schools in the marketplace. I just don't think this is true. Colleges themselves deal with this all the time in admissions. When they get a high school transcript, attached to that transcript is a fact sheet about the high school that gives its distribution of grades. That way the recipient can discount the GPA as appropriate. Every company doing hiring should demand the same of colleges.
Here is a personal anecdote. My son Nic's school grades hard. Something like 2 kids over the last 2 decades have graduated with a 4.0. One could argue my son's grades could have been higher at another school, but knowledgeable consumers of high school GPA's know how our school works and we have never felt he somehow was at a loss due to the school's grading policies (but Oh God can type A parents fret about this incessantly among themselves). [edit: took out brag about my son. Nothing more boring than other people bragging on their kids.]