I was lucky in that my medical school was on a pass / fail system. The first two years of basic science coursework, you could only get a pass or fail in each class. I think each professor did select a few students to mention as "special commendation" for the purposes of selecting students for AOA the Medical Honor Society. The last two years, our transcript only shows pass (or fail if you did fail a rotation). However, for internal grades, you were given designated a "grade" of fail / low pass / pass / high pass / honors. Grades of high pass and honors did actually show up in our Dean's Letter which is sent to every residency program you apply to.

However, I think most medical schools use traditional letter grades. These grades would be very similar to undergraduate grades. Grades would important for AOA selection as well as applying for residency programs.