The original purpose of the grading scheme feature in Canvas was to automatically map a letter grade onto a percentage-based (or points-based) final score in the Canvas gradebook, typically using the well-known formula that sets an A to be 90% and above, a B at 80% and above, and so on. The letter grade would appear right next to the final score percentage in the Canvas gradebook, and students would see it in their own grade report page. This system would have been useful for institutions at which the Canvas gradebook represents the grade of record for a course. It might also have been helpful for students who want to know what letter grade they currently have in a course, although that letter grade would not be accurate until most assignments had been completed. See How do I use grading schemes in a course? for more information.
It is of course still possible to use the feature for the purpose described above, however, it is also possible to use grading schemes for individual assignments. A very simple application of this would be use the same grading scheme describes above (90%+ = A, 80%+ = B....) for the individual assignment. When the instructor enters a grade of say, 95, in the Canvas gradebook, the letter A would populate. Or, the instructor could simply type in letters instead of numbers. However, it is also possible to create wildly different grading schemes that map percentages or points not to letters, but to words ("Exceeds Expectations", "Meets Expectations", etc) or even emojis! And an instructor can use different grading schemes for different assignments.
This 11-minute video illustrates the setup process for enabling grading schemes for a course, for individual assignments, and for creating new grading schemes:
https://framingham.hosted.panopto.com/Panopto/Pages/Viewer.aspx?id=ee818aa2-3841-43f5-b4a8-b11c015a0243
Relevant Canvas Guides:
Additional Resources:
https://emojipedia.org/