There are six levels of drywall finish, from 0 to 5, that refer to the amount of work performed during the finishing process.
Level 0: Drywall is hung with no finishing work.
Level 1: Tape is placed over the seams between drywall sheets.
Level 2: A thin layer of mud is applied over the tape and screw holes. This level is common for utility rooms or walls that will be covered.
Level 3: A full coat of mud covers the screw holes and tape, but the surface is not sanded. This is often used in garages.
Level 4: This is the most common finish for visible interior walls. It involves applying two coats of mud over seams and screw holes, with sanding between each coat, creating a smooth surface ready for flat paint.
Level 5: This is a high-end finish for luxury homes. It includes full taping, mudding, and sanding, plus a final skim coat over the entire surface before painting.