It seems to use some combination of CS, Kills/Deaths, % of fights your champ is involved in, and some kind of "lane win" component (maybe turrets?). It also over-weights winning or losing, in that getting a high grade with a loss is very difficult even if you play exceptionally well, and you can get Bs or sometimes even As while being carried. League points and MMR/ELO are already there to evaluate team performance + individual performance over time. These grades should better represent a score for how an individual contributed to a single game. Being the only player to go positive on the team in a 4v5 with an afk and doing something like 9/3/7 while literally everyone else on the team that didn't AFK was negative and lost lane is not a situation where you deserve a "B" grade; what more could you have realistically done? Over time enough games will iron out the noise that puts on MMR, but for individual game performance grades they'd be more useful if they more consistently represented performance in that individual game.
I wouldn't put much stock in it for now. It's a good concept that doesn't seem fleshed out yet. I have been going over some of my games lately and I've had a few games in the A+ to S range where I made more significant mistakes than games where I got a B or less, simply because we wound up winning or the other team threw even worse. To me, if it's working like it should be, that kind of grade disparity should be very rare.