Signal reports are given to provide an indication of the received signal's Readability, Strength and Tone (RST!). They are very useful to judge how well your particular station set-up is working and the propogation conditions at the time of the QSO.
Any reports of 4 or less are suggesting you repeat of the main information of a CW QSO (name, QTH etc.).
Forget giving anything other than 599 for contests though - this is often the default of the logging software's RST field for the contest staion so giving something else will mean the machine-gunner will have to reload mid-QSO, is this a bad thing? I leave it to your discretion!
By the way - RST for CW and digimodes (ur rst 339); RS only for speech ("your 5 and 9"; "20 over 9" - the 20 means 20dB over S9, on the S meter so not really an RS report but variety is the psice of live).
The R stands for "Readability". Readability is how easy or difficult it is to correctly copy the information being sent during the QSO. Think of it as how easy it is to read each CW letter or, in speach, a word. Many CW signals could count a 3 for me!
Unreadable
Barely readable, occasional words distinguishable
Readable with considerable difficulty
Readable with practically no difficulty
Perfectly readable
The S stands for "Strength" - how powerful the received signal is at the receiving location. Although an S-meter can give a very good indication these are often calibrated differently - or not at all! If you think about it the average is 5 so your reports should average 5 if you are having a good mix of QSOs - I bet they average 9 though!
Faint signal, barely perceptible
Very weak
Weak
Fair
Fairly good
Good
Moderately strong
Strong
Very strong signals
The T stands for "Tone". Tone is used only used in CW and digital modes and is left out during voice operations. Very rare to have a problem here but you never can tell. Long-live homebrew and vintage rigs to keep the T of Tone a valuable report - of course they will all be a nine!
Sixty cycle a.c or less, very rough and broad
Very rough a.c., very harsh and broad
Rough a.c. tone, rectified but not filtered
Rough note, some trace of filtering
Filtered rectified a.c. but strongly ripple-modulated
Filtered tone, definite trace of ripple modulation
Near pure tone, trace of ripple modulation
Near perfect tone, slight trace of modulation
Perfect tone, no trace of ripple or modulation of any kind