In most CRM systems, the term lead scoring designates a process of assigning a numerical value to each lead in order to reflect the lead's likelihood of becoming a paying customer. The process is similar to credit scoring.
How lead scoring works
Most leads enter CRM system as 'cold', meaning you have zero information about the lead. Then a sales representative attempts to find out information about the lead by asking a series of questions and giving points for each answer. For example, if your lead is a CEO, a score of 10 might be assigned, whereas an intern might warrant a score of 0. The company size is often a factor in lead scoring, since larger companies tend to have a larger budget. Automatic lead scoring systems add points based on leads behavior - such as clicking links inside emails, signing up for webinars, requesting quote and so on. The goal of lead scoring is to show you which leads are most likely to buy.
It's important to understand that scoring is just one of many lead qualification techniques. Most CRM systems don't use scoring but move leads through various stages, which has the same effect in helping your salespeople identify best prospects.