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 on the inside (clouds, feathers, included crystals) or surface blemishes (scratches, polish lines, extra facet). 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 Flawless, diamonds which are completely free of blemishes and inclusions even under 10x magnification, to Included 3, diamonds which possess large, heavy blemishes and inclusions that are visible to the naked eye.