That's a really great question.
I've given my system a lot of thought. I've also changed my mind once or twice before settling on the current system, though I never "invested heavily" in rating until more recently when I settled on my current scheme (a few years ago).
I rate like this:
* : Song I want to keep, for "completeness" reasons. To not break up an album (or maybe a live set I attended, or something like that), but that I would otherwise probably delete. This is used as a "do not include" flag in many of my "mixer" views, and for transferring to handhelds and whatnot. This is also used to denote poor quality recordings (mostly live) that I don't want to just delete for some reason. Maybe there is one standout part of a particular live set, or something, that gets rated higher, but the rest get ones to keep them out of my way.
** : I consider this to be equivalent to blank. I don't ever bother to rate things two star, unless it is one of a few songs in an album or recording which has a lot of other highly rated tracks (and then, only so "I don't forget it isn't done"). Vanilla. Catalog tracks. My full library isn't very heavily rated, though, so blank can also mean "unrated". Obviously, this is the biggest part of the curve in my ratings histogram, if you consider blank == 2. If blank isn't equal to two, though, I have only a smattering of these.
*** : Songs I really like. The best track on a mediocre recording, or a song I would consider "quite good" on a fantastic record, though not one of the best. Sometimes, a still-pretty-good track from an Artist I used to love, but which has now jumped the shark a bit. I actually have fewer three-star rated tracks than four-star rated tracks, but that's from a selection bias (and it is hard to decide between two and three). The trend, however, is the reverse. Eventually three will overtake four, as a higher percentage of my library gets rated.
**** : The best songs on a really good album. In many cases, the best songs by a particular Artist. Songs, or recordings, I'll still remember 15 years from now. Also, some things that have special meaning in some way, despite maybe not being the best "quality" recording. Or, sometimes, just really good examples of a pristine recording, or version, of a particular track. This is actually my highest count (in raw numbers) of rated tracks, when you exclude blank. But, except for new imports, those ratings are quite stable (and few, relatively, in number). After I started this system, I did try to go through the catalog a bit (I just lost steam at some point), and I rated only 4s and 5s, so there is an "incomplete bias" as well.
***** : The best songs of all time. There aren't many of these, and fewer Artist still have more than one.