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There's some truth to the code talking. The teacher has to be careful because what he or she writes is going to become public knowledge. If they come right out and say "this kid is a moron, and a jerk on top of that", it's not the greatest career move as the parents, aka taxpayers, aren't going to take that well and could become serious thorns in the side of that teacher and his/her career.
The phrase "damming(sic) with faint praise" is very applicable here. If a teacher likes and respects a student, they're going to be happy for them to be getting an opportunity at prep school, and will go above and beyond on the recommendation. Anything less than that - "works hard, able, solid student" - might as well be a "meh, whatever, I don't care one way or the other, the kid's ok but won't be adding anything special to your school", because that's how it's read in the admissions office.
Right.... kind of like the code for a blind date who has "a good personality" (lol). When everyone understands it, it is not really a code.
I think what everyone understands is that there is recommendation "inflation" just like there is grade "inflation".
Similarly when you are a dinner guest, and you are asked, "how was the meal?". When everyone knows how to interpret the answer, it is not a code!