When we speak of a diamond's clarity, we are referring to the presence of identifying characteristics on and within the stone. While most of these characteristics are inherent qualities of the rough diamond and have been present since the earliest stages of the crystal's growth below ground, a few are actually a result of the harsh stress that a diamond undergoes during the cutting process itself.

If you think about the incredible amount of pressure it takes to create a diamond, it's no surprise that many diamonds have inclusions -- scratches, blemishes, air bubbles or non-diamond mineral material -- on their surface or inside. Diamonds with no or few inclusions and blemishes are more highly valued than those with less clarity, not just because they are more pleasing to the eye, but also because they are rarer.

Diamonds are graded for clarity under 10x loupe magnification. Grades range from Internally Flawless, diamonds which are completely free of blemishes and inclusions even under 10x magnification, to Imperfect 3, diamonds which possess large, heavy blemishes and inclusions that are visible to the naked eye.

FL:  Completely flawless

IF:  Internally flawless; only external flaws are present, which can be removed by further polishing the stone

VVS1 - VVS2:  Only an expert can detect flaws with a 10X microscope.  By definition, if an expert can see a flaw from the top of the diamond, it is a VVS2.  Otherwise, if an expert can only detect flaws when viewing the bottom of the stone, then it is a VVS1

VS1 - VS2:  You can see flaws with a 10X microscope, but it takes a long time (more than about 10 seconds)

SI1 - SI2:  You can see flaws with a 10X microscope

I1 - I3:  You can see flaws with the naked eye.  Consider avoiding I2-I3 diamonds.

REMEMBER: For grades IF through SI, a diamond's clarity grade has an impact on the diamond's value, not on the unmagnified diamond's appearance.

While Flawless diamonds are the rarest, a diamond does not have to be flawless to be stunning. In fact, until you drop to the "I" grade, a diamond's clarity grade has an impact on the diamond's value, not on the unmagnified diamond's appearance. Diamonds with VVS and VS grades are excellent choices for both value and appearance. More affordable (and still a great choice) are those diamonds which gemologists call "eye-clean" - diamonds with no inclusions visible to the naked eye. These diamonds are SI1 and SI2 and unless the recipient carries a 10X loupe (a strong jewelry magnifying glass), she won't see the inclusions.

There are many different types of flaws.  The best way to become acquainted with them is to look at lots of diamonds.  The more common ones are as follows:

Pinpoint:  A very small white dot on the surface of the stone.  By far, the most common flaw

Carbons:  A very small black dot on the surface of the stone.  Less common than pinpoints

Feathers:  Small cracks within the stone, similar in look to broken glass.  Small internal feathers are harmless (other than lowering the clarity rating of the diamond), but large feathers can become a problem because the crack can grow as the diamond ages

Clouds:  Hazy areas within the diamond, actually made up of many small crystals that are impossible to see individually

Crystal Growth:  A small crystalline growth within the diamond.  Looks like a small diamond within the big diamond

Unfortunately, clarity is very difficult to judge accurately by an inexperienced consumer, so your best bet is to gain an education first by looking at lots of diamonds before making a purchase.  Any good jeweler will spend the time you need to get comfortable judging the clarity of your stone -- ask different jewelers to point out the  flaws in several stones until you can detect pinpoints and other flaws by yourself.

Many people make clarity the least "important" of the 4 Cs when purchasing their diamonds.  The rationale is obvious -- when your partner shows the ring to all her friends, the likelihood that one of them will pull out a 10X microscope to examine the flaws on her diamond are very slim.  Given that, why spend a lot of money on a VVS1 diamond when an SI2 will look exactly the same to the naked eye? 

If you're purchasing an emerald cut (or any other step cut), consider purchasing a diamond with clarity greater than SI1.  Clarity flaws are much more readily visible in step cuts than in brilliant cuts.