Ofsted grades are grading the school. They (the Office for Standards in Education) are the national regulatory body trying to keep standards up or (at least) level across all playing fields.
As already gone into, they give out 'grades' like "Good" or "Excellent". They actually do this for various subsets of assessment (quality of education, quality of facilities, student behaviour/attitude) and then somehow produce an aggregate grade. Many schools seem to have gone so far as to get a canvas banner printed, to hang upon their security fencing, proclaiming that Such'N'Such Street Nursery School (i.e. Kindergarten) is rated as "Excellent" or Smalltown Comprehensive (==Secondary) is rated as Good (despite all local expectations). Proudly proclaiming "Satisfactory" is rather making a silk purse out of a sow's ear...
(My old Secondary Modern school was, many years later, put into Special Measures, possibly forcibly Academyised, and then merged with another SM from the next town over, to move into a brand new school complex between the two towns and the old, separate buildings demolished. Last I heard.)
OWLs (Ordinary Wizarding Levels?) are a clear equivalent to the UK's mugglish O-Levels (for "Ordinary", officially known as General Certificate of Education: Ordinary Level/GCEs), that JK would have experienced during Secondary education (or the first five years of it, from 11 to 16ish). They were superseded by GCSEs (General Certificate of Secondary Education), but that was some time in thr '80s. Although it was possible to get no O-Levels (or GCSEs), they inhabited the period of (normally) compulsary education, before the choice might be made to get further schooling, go into vocational training or just legally drop off the radar.
After O-Levels, were (and still are) A-Levels. "General Certificate of Education: Advanced Level". For those who choose to pursue them. Typically taken during the 6th and 7th years of Secondary school (where that school maintains a "sixth form", the years often described as "lower sixth" and "upper sixth"), or upon moving on from the Secondary to a Sixth Form College (often just "Townname College", if not something more fancy/inspirational, and context differentiates these from a University College), which gives those two years (or more, or sometimes less, depending on the student's needs, ability to cram, find further courses to interleave, etc) as a proxy for several Secondary establishments that no longer run their own 6th Forms. They also often act as "night school", as well as day-school for Mature Students coming back to Further Education, mixed in or not with the 16-18 year olds...
(JK informed us that ?Nasty Exhausting Wizarding Tests?, N.E.W.T.S., were the 6th/7th year qualification at Hogwarts, I think.)
A-Levels are considered fairly necessary to gain access to University (there's other ways, but it's generally the A-Level grades that tend to be compared and contrasted accordingly, even if there's an additional Entrance Exam asked, e.g. for prestigious Oxbridge undergrad degrees).
CSE:O originally graded 1 (best) to 5 (worst, but tried) and U (ungraded), then transitioned to A-E (best to worst) and U. When GCSEs took over this became A-G+U (same ordering) and later added A* (A-Star) to differentiate the best-of-the-As. They're just this/next year (I think) changing to 9-1 (best to worst, 9 being essentially A*) and... U still. (Database programmers might have prefered zero, or minus one, I suspect...).
A-Levels are A-E (order as above, Awsome to Eek!, not my "Awful to Excellent" joke) and then U (ungraded) or F (fail), depending on the era. There originally was also O ("would have passed if it was an O-Level") that became an N ("Nearly passed), and there's also now A* (as per GCSE, "the better type of A"). AS-Levels ("Advanced Supplementary") are graded 'starlessly' A-E+U, being (typically) one-year sub-set courses that are "not a full A-Level" but can often fit alongside existing studies to show and develop an interest.
As a rule of thumb, grade A (in relevant O-Level/GCSE and A-Level schemes) was always sought for. A* introduced as (through improvement in learning and/or reduction in examination/coursework standards, depending on who you talk to) grade A was too top-loaded with undifferentiatably successful students.
(Getting 9 A* GCSEs is considered remarkable, still,. It may require clever course-scheduling almost entirely in grade-worthy courses for a prospective high-achiever to get nine grades at all, even at full-time Secondary School... Or home-schooling in a hothouse environment, before rolling up at an agreed-upon school running the various exams.)
Getting a C or better was a good guide as to whether one could/should go for A-Levels in the subject, though I don't think Ds or lower disqualified, merely promoted discouragement. Three or four A-Levels was the norm at my 6FC, or 3 A-levels and an AS/redo-O/GCSE (to rectify a gap in Secondary) maybe, with Tertiary education being more part-time ad-hoc, but qualifications more concentrated to a field (Maths at Secondary, Maths with [Statistics|Mechanics|whatever] as A-Level, for example) as well as advanced.
Getting C+ at A-Level is considered a "Pass" (or D-of-below a fail, psychologically at least). When I was going to university (not Oxbridge!), my "offers" tended to ask for things like "two Cs and a D" as a line in the sand for immediate consideration upon getting the results, but open to discussion if one didn't get that. Prominant Oxbridge courses, like Law, probably demanded AAB(B). These days, four A*s might well be the "minimum" request at the top end (and passing supplementary tests, as well), from what I've heard, but I can't say for sure.