A couple of people have written to me saying they also have problems with yarn labels.  Here in the US, they're not very standardized - especially compared to labels made for the European market.  Here are some examples. 

First, here's a label for Harlekin, a yarn imported from Germany:

You can see not only a recommended needle size, but also a rough consumption guide for how much yarn it might take to make several different garments for average size men, women and children.  Note the little square shape with numbers above, below and aside it - that's the gauge square, and shows how many stitches and rows the maker recommends for this yarn.   It also has complete care instructions.  This is pretty much the Cadillac standard of yarn labels in terms of the amount of information on it.

By contrast, here's a label for a US yarn, made by a small producer (to be fair, it's an old label, and current ones from the same maker might have more info on them):

You'll see that this label has yardage, but no gauge info; and wash directions are rudimentary at best.

Most yarns fall somwhere between these two.  Here's one that's typical:

No little gauge square, but the info is there in prose.  Good care information.  Yardage and skein weight are also there. 

There is a move afoot led by the Craft Yarn Council (mostly made up of mass-market yarn distributors and makers, plus some magazine publishers) to standardize on a new set of yarn descriptors for weight, and for those descriptors to appear on future yarn labels.

You might see markings like these:

While there is considerable weight behind implementaton of these symbols, frankly I think they are not worth the paper they're printed on.  The effort is a laudable one - to simplify the system of yarn designations, removing confusion from terms like worsted, DK, sport and the rest.  But what they do is substitute a set of imprecise descriptors for the admittedly arcane but specific existing terms.

Here's the chart of what each symbol means:

^{(source:  Craft Yarn Council's http://www.yarnstandards.com/weight.html)}

For example, you'll note that the old standard of DK - a pretty precise designation meaning 5.5 stitches per inch is now lumped into a broader guideline that covers everything from 21-24 spi.  That's a TREMENDOUS difference, as true sport weight yarns cannot be successfully substituted for the heavier DKs.  But magazines are printing patterns as being made from a Group 3 yarn.  The way this symbol is so prominently featured leads beginners to believe that ANY Group 3 yarn can be used. 

"Oh" you say, "they can't be that naiive."  Well they are.  I'm not a yarn shop owner, but just in my visits to my LYS I've seen a good half dozen projects ruined by exactly this error.   My heart really goes out to the folks who buy yarns sight-unseen on line, or people who shop in crafts stores for their knitting supplies.  Neither venue offers hands-on help or the sanity check of dealing with another knitter face to face.  Who knows how many people are abandoning projects (and knitting) in disgust because they picked out yarn with only the symbols for guidance and have been disappointed.

My advice?  If you're a designer or yarn maker, try resist the pressure to use this ill-conceived system.  If you're a knitter - ignore it.  Look at the gauge listed (provided there is a gauge listed) NOT the yarn group.  If you're doing substitutions, plan on swatching.  Lots.  Start with the maker's recommended gauge.  Some yarns may perform well over a range of gauges, but not every yarn is guaranteed to achieve the full range of gauges listed in its newly assigned group.