xx-0 if you don't understand the language practically at all. You can use this if there's some reason why you might be expected to know the language better, or to indicate that you know something very little about it. Your user page will not be categorized by placing that template.
xx-1 for basic command (the ability to understand the language somewhat and to ask or answer simple questions)
xx-2 ability to modify articles and to participate in discussions
xx-3 for advanced or fluent understanding (the ability to write articles in this language without difficulties, minor errors may occur)
xx-4 if you have a grasp of the language comparable to a native speaker, but are not a native speaker
