For this test you will need a course with at least one student in it and a forum, database or glossary activity.
1) Click on Grades within Course Administration. Select Scales from the gradebook navigation drop down.
2) Click on "Add a new scale". Enter a new custom scale. For example bad, ok, pretty good, good.
3) Go to your activity (forum, glossary or database) and view its settings. Under Ratings select Average as the aggregate type and set the scale to be the scale you just defined.
4) As a student add an item to the forum/glossary/database.
5) As the teacher rate the student's item. The aggregate of that rating should appear next to the rating drop down box. The average of your single rating should equal the rating you submitted. The string from your scale should be displayed rather than a numeric value.
6) Go to the grader report and verify that the student's grade appears as an item from your scale and not a numeric score.
7) As the student view the User report (Course administration -> Grades -> User report) and verify that the student's grade is displayed as an item from the scale and not the numeric value.