You're either good or bad. Period.
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Sarcasm
To be honest, like anything, there are way too many factors to determine something like this, especially in magic. It is very far from black and white because of how many styles there are.
One thing to note is whether or not people are able to perform well in front of a crowd. Lots of people know the tricks and can do them "well" technically with all the sleights, but they don't know how to actually perform for spectators.
I consider someone who is sloppy with the sleights, but good with the performing as good. But it all depends on what type of magic it is too. Obviously the best way to be "good" is to simply practice a lot, try your magic on people
regularly, and always be analyzing and criticizing your magic in every possible way. So really be good, you have to be in the pursuit of being good. Once you reach the point where you do magic to have fun and you are always working on improving, then you are "good" in my book. I don't think it should be thought of in levels of skills.
I'm sure others will disagree with me, but I really thing it is important to note compare yourself to others in that generic way like most arts/sports do. It all comes down to a matter of opinion.
How many times have any of you done magic for people and left them say stuff like, "Wow, you're better than David Blaine." Everyone has their likes and dislikes, just do your best to entertain as many people as possible (and yourself!).