In simple terms, a neutral density (ND) filter cuts down on the light hitting your sensor. A full ND reduces exposure over the entire frame while a graduated (grad) ND reduces exposure over some of the scene. This post will go over how to set your exposure when using a grad ND filter.
If you haven’t already, check out the first post on Using Graduated ND Filters.
In this soft-step grad ND, the transition between light and dark is spread out over a large area. There are also hard stop filters that have a quick transition from dark to light. Soft steps work well when there are things covering the horizon such as trees or mountains. A hard stop filter works when there is a clear horizon, like over the open ocean.
Choosing between an ND2, ND4, and ND8 filter depends on the dynamic range of the scene. In a cloudy scene where the sky isn’t much brighter than the foreground, you may only need a 1 stop reduction from an ND2 filter. On a bright, sunny day where the sky is much brighter than the foreground, you will need an ND8 to bring out details in the foreground shadows.
Of course this is just a quick, casual way of picking the right filter strength. If you’re more technical, you can meter in both the sky and the foreground and determine the number of stops between the two. Using center-weighted average metering mode works better than evaluative mode to accomplish this.