They give these classifications in terms of which pencils are the best to buy. See, the #1 pencil is really expensive. Just one costs like $45000 and it's got unlimited lead and everything! But no one's going to pay that much for it, even though it's a great pencil. That's why we have #2, because it's cheap and pretty reliable. Then, there's the #3, which really sucks. Then, there's #4, which is just... You're really going to pay $400 just for a pencil that won't even last one letter? jk
It's the degree of hardness or softness in the GRAPHITE of the pencil. # 1 is very soft and the writing is very Black, bold....not to easily found. # 2 is the most popular "grade" of graphite, easily read and most commonly called for and found; #s 3 and 4 are hard "leads" which give a light writing, hard to see. Probably used in a specific type of writing or work....teachers do not like # 4s at all.
Its a classification of the hardness and blackness of the graphite 'lead', has nothing to do with popularity. Pencils graded on the European grading system (used also by the US) go from #1 (softer and lighter) to #4 (very hard and dark).