Diamonds can have internal characteristics known as inclusions or external characteristics known as blemishes. The fewer inclusions or blemishes, the more rare the diamond. Inclusions are internal, that is, inside the diamond. Two common inclusions are crystals and feathers. Crystals are merely minerals trapped inside the diamond; feathers are breaks in the diamond. Blemishes are usually very small and are only found on the surface of diamonds. These may be a result of the polishing process or through the wear of the diamond.

When grading clarity, the grader uses a binocular microscope with 10x magnification and specific lighting, then considers the effect these characteristics have on the diamonds appearance and/or durability. Diamonds without inclusions or blemishes are rare; however, most characteristics can only be seen with magnification.