How common are having D-(1-3) highschool teams?

My state they break up sports by divisions. I came across this when Talking to someone about our high schools playing, and he said that would happen because my school has a D1 team and his D3. I asked a coach and it’s true that there are 3 divisions based on how good a school is. I always was under the impression this was not the case wth high school ball. How common is this?

In Arizona, there are 4 or 5 levels based on attendance - not on how good schools are although, generally speaking, the larger schools are usually able to field better teams due to the larger pool of players from which to draw.