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Does it mean "party"?  Is it correct to say "το σχολικό πανηγύρι αποφοίτησης" (school graduation party) ?

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Πανηγύρι means “feast”, “fair”.  It is a periodic festival either for religious or for commercial reasons.

It is a compound word (πάς + αγείρω).  Πάς means “everybody” in ancient Greek.  Αγείρω means “gather”.  It has the same root as “αγορά” (agora), the central spot in ancient Greek city-states were people gathered for political speeches, shopping, etc.
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Thank you Vasiliki.