Weapon grade is a measure of the rarity of all combined parts, unless radical departures have been made from Borderlands 1's rarity system. From my in-game experience the general system is the same, though minor tweaks to how rarity is counted may well have occured.
The way it works is guns are made of parts. The unique stats of each gun at the same level are due to their parts. Parts have different stats; rarer parts have a higher rarity and generally better stats or special effects.
The total rarity of all parts determines the color. Guns with crap, common parts are White. Guns with good, non-unique parts are green or blue, or sometimes even Purple. Legendary parts, the parts that turn a good gun into a recognizable, named gun, have extremely high rarity values which force them into the Orange category. Unique parts (like named, unique quest rewards) always push a gun into at least blue rarity.
Rarer parts are stronger in general, but may have other weaknesses. You should always compare the actual stats of the items. (Note: Level requirement always plays a role in how powerful an item is and, as always, actually give the new gun a try before ditching the old one. So a purple weapon for level 8 may not be as good as a green weapon for level 11.) You can also generally disregard White weapons after a certain level as they have no particularly special parts.
Also Class Mods (COMs) have an explicit rarity function; white COMs boost stats but not skills, green COMs boost one skill, blue COMs boost two, and Purple COMs boost three. I don't believe there are legendary COMs (there weren't in Borderlands 1). There aren't identifiable "parts" for COMs (there are for Shields and Grenades however), but you can tell all you need to know from their stats alone. There are Legendary class mods, but they have preset boosts (within randomly generated ranges)
There's a side quest you can do for Tannis called Splinter Group. It involves you taking out a group of mutants in the sewers. You cannot open that door before killing them, as their area is locked until you can convince them to open it during the side quest. At the end of their little area is a ladder. It leads up to that door. That's the only way to open it.
On the plus side, XP and two weapons chests!
Best Answer
Check to make sure that your inventory isn't full.