Well, your school is basically the same, they just change the "name" of the label. i.e. outstanding=honors, etc. My med school gave letter grades for clerkships, not "honors/pass/fail" either. It's easy enough for anyone to figure out, especially residency directors. I had one visiting med student whose school required a numeric grade for his clerkship (scale of 1 to 100, no further information about grading given so I didn't even know how high passing was).
Also, dean's letters also provide the grade distributions for clerkships, so program directors can see the percentage of people in your class who got outstandings compared to proficient.
As someone who has seen the UIC clerkship forms, I can tell you that they somewhat describe what qualities exist for each grade, so it helps curb some of the subjectiveness that other schools have (it's harder to give a lower grade if a student clearly meets criteria for a certain grade---at some schools it is completely up to the grader as to what they consider to be 'outstanding').
But, anyhow, the labels for your grading system will not affect you in the residency selection process, so it's nothing worth worrying about.
