Olive oil is a product of agriculture that, just like many other products given to us by nature, is graded into quality categories. The grades are defined by the International Olive Council.
Extra virgin olive oil is a grade of olive oil, in fact it is the highest quality grade of olive oil. Kind of like a perfect D color diamond! To be classified as extra virgin, olive oil must have certain characteristics. In some countries (but not in all) these characteristics are defined by law and it is a legal requirement to not mis-label the olive oil. The claims made on the label must be reflected in the chemical analysis of the olive oil, performed by a recognised laboratory.
To be graded as extra-virgin, by law olive oil must:
1) have an acidity level of less than 0.8%
2) have no defects in taste and smell (such as rancid, winey, metallic, musty, fusty etc.)
3) exhibit some fruitiness in its aroma
These attributes can be established by highly trained and experienced professional graders with the help of laboratory equipment, hence the need for putting it all into law to avoid misrepresentations and mis-selling. Even the layman though can learn what to look for.
Extra virgin is the best and highest grade of olive oil, which is also reflected in its higher price relative to the next lower category, virgin olive oil or the one below it, pomace or lampante olive oil. On the subject of price, while it is impossible to find cheap high grade olive oil, it happens not too infrequently that a lesser quality product is priced as if it was something much finer.
While the lower grades of olive oil still retain some of the healthy benefits of olive oil (for example the high proportion of monounsaturated fats), it is only extra virgin that delivers the full suite of the many and much valued health benefits.
Virgin olive oil has an acidity level higher than 0.8% and may have slight defects in taste or odor present. Above an acidity level of 3.3% olive oil is no longer fit for human consumption.
For a connoisseur there are differentiations within the extra virgin category of olive oil as well. All extra virgins are not created equal! A mass-produced extra virgin may still just meet the minimum requirements to be classified as such, but it can not be compared to a fine, single origin, premium extra virgin. The designation "premium" is not legislated. Any producer can call their olive oil premium. One has to know to look behind the marketing terms.
A genuine premium extra virgin should usually have an acidity level of below at the very most 0.5%, high levels of antioxidants and a fine, balanced aroma profile when tasted. Be very wary of olive oil bottles that do not clearly state the country of origin of the oil or that hold back information on olive varieties used etc.
Making a good quality olive oil is a hard job that requires an intense level of both dedication and know-how. It's very different from making seed oils. To get to low acidity levels farmers must have the healthiest, pest and disease-free trees, producing the healthiest olive fruit. Acidity in olive oil represents oxidation and deterioration. Think of it as a kind of "rusting" that produces the rancidity that we so much dislike and want to avoid. Any bruising to the olives in the harvesting process will lead to higher acidity levels. Any delay in getting the fresh olives to the mill, any unfit storage conditions that lead to rot, any negligence or laziness during the processing, packaging and transport of the oil and its acidity levels will rise. The higher the quality standards applied, the higher the usage and cost of labor in the grove and in production.
The higher the quality of your oil the more it does for you. People often shy away from using their "good" bottle of olive oil for anything other than dressing or "finishing" dishes raw. There is a widely held misunderstanding that the better olive oil "burns" easier in cooking processes and therefore a cheaper, lower grade oil is used for those. In fact the better the quality of your olive oil, the higher its smoke point. In the high quality segment only unfiltered oils burn easier as it is the suspended particles of fruit pulp and skin in them that will ignite and smoke rather than the oil itself. A high antioxidant olive oil should have a smoke point of about 210 degrees Celsius and will do great in roasting or baking in the oven, cooking stews and soups on the hob and shallow frying fish or eggs and vegetables. We generally roast and bake at 170-200 degrees Celsius and for that our "good" olive oil is great.
To get the highest benefit, as well as enjoyment in taste and aroma from olive oil, extra virgin is the way to go.
Only a minuscule proportion of the worldwide production has the quality grade of true premium extra virgin.