The diamond clarity refers to the existence and visual appearance of the so-called imperfections and blemishes

• Imperfections can be foreign material, such as other crystals, as well as air bubbles inside the diamond, or internal imperfections, such as tiny cracks inside the stone.
• Blemishes are diamond surface imperfections (e.g. polish lines, scratches, chips, etc.).

The size, color, and dimensional orientation of imperfections and blemishes determines how visible they are to the naked eye. The grade of the clarity is assigned to each diamond based on appearance under 10x magnification.
Imperfections obstruct light refraction, making diamonds less brilliant. The larger the imperfections, the worse the diamond’s ability to reflect the light, degrading the quality of the gemstone.

The GIA (the Gemological Institute of America) has used its clarity grading scale since 1953. Diamonds are graded from FL (flawless) to I3 (imperfect), which is a stone with a lot of imperfections and blemishes visible to the naked eye.

Clarity grading scale (10x magnification)
	F / Flawless The diamond shows no inclusions or blemishes of any sort under 10X magnification when observed by an experienced grader. Note: Truly flawless or internally flawless (F or IF on the GIA’s grading scale) diamonds are extremely rare.
	IF / Internally Flawless. The diamond has no inclusions when examined by an experienced grader using 10X magnification, but will have some minor blemishes.
	VVS1, VVS2 / Very, Very slightly included The diamond contains minute inclusions that are difficult even for experienced graders to see under 10X magnification.
	VS1, VS2 / Very slightly included The diamond contains minute inclusions such as small crystals, clouds or feathers when observed with effort under 10X magnification.
	SI1, SI2 / Slightly included The diamond contains inclusions (clouds, included crystals, knots, cavities, and feathers) that are noticeable to an experienced grader under 10X magnification.
	I1, I2, I3 / Included The diamond contains inclusions (possibly large feathers or large included crystals) that are obvious under 10X magnification and may affect transparency and brilliance.

In 1992 the European Gem Laboratory (EGL) introduced another grade of clarity: SI3. Ostensibly, many industry craftsmen complained there was too wide a gap between the GIA standard grades SI2 (slightly included) and the I1 (included). Hence, why not offer a SI3 grade to bridge the gap? GIA did not recognize this new grade and a lot of jewelers believed it was just a veiled attempt to price gouge the most gullible consumers by selling them I1 grade diamonds at SI2 prices.

Different diamond grading labs and agencies developed their own color and clarity systems. All grading systems rely on human judgment and ability to determine the grade based on the overall agency grade description. Oftentimes the same diamond can be graded differently by the same agency if sent for grading more than once. Some agencies are considered stricter and more precise in how they grade stones. Diamonds tested by agencies such as AGS and GIA command a premium, while comparable stones graded by such agencies as EGL, HRD, and IGI are sold at 3% to 20% less.