Tier 1: MUNDANE
Exemplar: You, also Mystery, Peter Pan, Princess Leia, Bill and Ted, Jubilee
Qualifier: As competent as a normal adult human. This is the easiest one to understand because you're one of them. It should be noted that it's not the mere absence of supernatural abilities that make a Tier 1 characters it is the absence of supernatual CAPabilities. There are very few jobs I would prefer Philoctetes for over a trained human despite the fact that he is technically magic.
Tier 2: MUNDANE AWESOME
Exemplar: Aragorn, also John McClane, Conan, Sherlock Holmes, James Bond, Leonardo da Vinci, Han Solo, Rambo, Leonardo da Turtle
Qualifier: As capable as the best humans ever. The peak of human potential. If a tier 2 character is focused on one area (investigating, driving, blackjack, but not all three) they can surpass the limit of human potential. Characters in this tier influence the people around them but if one is in the room he's not automatically in charge. If Conan walked over and took your sandwich you'd let him but later you'd pretend you wouldn't next time.
Tier 2's own the situation around them
Tier 3: SUPERNATURAL
Exemplar: Buffy, also Wolverine, Captain America, Luke Skywalker, Spider-man, Master Chief, most characters in the fantasy or sci-fi genre
Qualifier: More capable than any human ever. These characters are as good as talented people at things they don't even focus on or really care about. These characters own everything around them to about lunging distance. You show Wolverine respect if you're at a bar with him but if he's in the Empire State Building and you're on Staten Island you genuinely don't give a shit if he has a problem with you, because to get you he'd have to take the fucking ferry. If Wolverine took your sandwich you wouldn't make a scene, because since he walked in the room that was his sandwich.
Tier 3's own the building they're in
Tier 4: SUPERNATURAL AWESOME
Exemplar: Magneto, also Wonder Woman, Neo, Hulk, Corwin of Amber, Thor
Qualifier: This is where people stop interacting with the world as you know it or playing by the rules of the game. They are better than anyone ever can be at things they don't care about and likely aren't aware of, and at things they do care about their scores are set to "TEXA$!". You can be invulnerable here and it's not that big a deal because when the aliens attack the only person immortality helps is YOU. Characters here own everything in the state or small nation they are in. If you're in Queens and Magneto lands on the Empire State Building you turn on the fucking news because that shit might legitimately affect your day. This is the first Tier where a character could legitimately declare war on a country or concept.
Tier 4's own the state they're in
Tier 5: DEIFIC
Exemplar: Superman, also Darkseid, Goku, The Prince Who Was A Thousand
Qualifiers: Characters here don't make sense. You can't if you want to get in. Superman is an object with mass that can move at light speed. The Prince Who Was a Thousand fights people backwards in time of when he starts fighting them. Characters here have a wide variety of invulnerabilities and capabilities because even the best one-trick-ponyism is not acceptable here. Characters here own the planet they are on. No matter where you live if Darkseid teleported into Antartica you would turn on the news because that means your planet is at war. These characters still operate and interact with things like mass, time, and distance but they bend the rules so heavily as to make them unreliable.
Tier 5's own the planet they're on
Their are also 2 outlier tiers which I'll describe below for completeness.
Tier 0
Exemplars: The Goonies, Shortround, Fivel, George-Micheal Bluth
Some stories are actually improved by having protagonists that are less capable than adult humans. Home Alone doesn't work at all if the guy in the house looks like this. Also at this tier are most animal protagonists, who are traditionally so low powered that their entire conflicts are that they ARE in a PLACE.
Tier 6
Exemplars: Cthulhu, also Franklin Richards, Galactus, Q, The Beyonder, Spider-Pig, and Dr. Manhattan (whom I dislike)
This is the tier of any walking Macguffin character simply made to be "Too powerful for the human mind to grasp!". They serve only a few plot purposes. First to be mysterious, difficult to conceive, and hard to predict. Second to let you write basically any plot you want and have them show up and demand the plot happen absent any other good reason. And third to make the thing in your setting that's so big that any plot involving it mandates everyone stop what they're doing and take notice.
The only thing that might exist at Tier 7 is the Abrahamic God (Only weaknesses:Iron Chariots and internal consistency!) Tier 7 is literal omnipotence.
Fun Facts About Tiers!
In small groups people can defeat characters 1 tier above them, but GTFO abilities will prevent lower characters from being able to affect the plot, almost no matter how many their are. Characters more than 1 tier below their opposition need special circumstances, preparation, or rituals to affect them. So a Werewolf or a Wraith (Tier 3) could be killed by a grizzled detective (Tier 1) if he had time to cast silver bullets or prepare some summoning ritual.
In my conversations I also separate "High" and "Low" within the Tiers to avoid the assumption that all same-tiered characters are neccesarily created equal. This is also helpful because any character who exists for long enough will rise in tier and bump up every decade by about half a tier, like low tier 3 to high tier 3 (Iron Man), or high tier 1 to low tier 2 (Xander).