Grades are the leveling system for DJ Hero 2's online component. You level up by playing battles online. This Thread has some details on how to get more DJ Points for leveling up quicker. There are no ranked match options, so this can easily be boosted.
You cannot invite friends to matches, though. Friends only matches will not give you points. Simply tweak the search parameters in your favor. It takes 12,700 points to level up to 50, which equates to something like 130 matches if you boost for 6 hours straight. Otherwise, it will still take you less than 200 wins.