As Brian Hooper already explained, the lingo is a shorthand way of rating someone's sex appeal.
When I read this question, I started to wonder about how this 1-to-10 rating scale may have become much more widespread in the vernacular after the movie 10 starring Bo Derek. One entry in the UD (not authoritative, I know) seems to back that theory:
Top grade woman (= 10 out of 10). From the movie '10', featuring Dudley Moore and Bo Derek.
At any rate, I remember my uncle explaining back in 1979 or 1980 what the film's title meant: “Have you seen the movie 10? No? Well, first let me tell you what a ‘10’ is...”). If my memory serves me right, the “she's an eight; she's a ten” remarks seemed to take off from there, becoming much more ubiquitous after the film.
I'm not claiming that the film was the first to use that subjective scale; I'm guessing that the “on a scale of 1-to-10” rating system was used in various contexts long before the movie (such as in gymnastics, for example). However, to simply say “She's a 7” without any kind of “on a scale of 1-to-10” prefix or suffix seemed to become much more common after the film's release.
The Ngram is interesting but inconclusive, because of hits on things like “she's a ten-year-old girl,” and “she's a ten-to-one favourite,” and even “What size is Kelly?” “She's a ten.”