What does "grading in a curve" mean?

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Principal A is talking about "grading in a curve" in a faculty meeting. What does this expression refer to?
a. A student grade determines whether or not a student attains a defined standard of achievement.
b. A student mark tells how closely he is achieving to his potential.
c. A student mark compares his achievement to his effort.
d. A student grade or mark depends on how his achievement compares with the achievement of other students.
e. None of the given options.

English is not my first language so I'm having a hard time understanding the options :(