This has turned into an outstanding thread!
Sorry if this is redundant. The point where you move to the next grit is when all the lines from the last grit no longer show. Any step is a good example, say you've done 400 grit and are now working on 600 grit and have changed angle slightly to better see the 400 grit lines. Once all those are gone, the 600 grit is done and you can move along.
The biggest change in my finish work occurred when I listened to a more experienced maker, and I bought one of those visor thingees with magnifying lenses. If you think your stuff is good enough. Look at it again through a magnifier and prepare to be crushed. Then start again w/lenses. It really makes a difference.
Anyone remember picture puzzles? The same phenomena works here too. Leave the blade alone for overnight, for a day or so, then go back (with magnifier) and eyeball it again. Stuff just shows up that you swear you didn't leave behind. As with puzzles, you can't see stuff that is right in front of you after staring for a while.
That being said, you have to decide when to quit. If you use enough magnification, scratches will be there everytime you look, even on stuff that is mirror buffed. There is no such thing as perfect when enough magnification is available.