4C's of Diamond

Determining Diamond Quality
Diamond quality is evaluated by four characteristics, called the "4 C's": carat weight, clarity, color and cut. Though many people like to debate the value of each characteristic, most good jewelers agree that a balance of all four characteristics make a good quality diamond.

Carat Weight: In 1913, a standard for measuring the weight of diamonds and gemstones was created. The standard weight, known as a carat, was the same title giving to pre-standardization measurements and actually derives from the word for carob seed, which was the unit of measurement by which gemstones were weighed in ancient times.
One carat is equal to 1/5 of a gram or approximately .007 oz. One carat is then divided into smaller units of measure, called points, each carat equaling 100 points. Diamonds less than one carat, or measuring in-between carats (i.e. one and one half carats) are generally measured by points and are rounded off to the nearest measurement. For example a 3/4 carat diamond is a diamond measuring from .69 points to .82 points, and is still considered a 3/4 carat diamond.
Carat weight plays a very important part in the value of a diamond, though diamonds of the same weight can vary greatly in value depending on the quality of the other "C's".

Clarity: The clarity of a diamond is a measurement of the inclusions or blemishes inside and/or on the outside of a diamond, under a 10x microscope. The rating system is subjective to the master diamond cutter, though the guidelines are as follows:
FFlawless
No internal or external flaws can be seen under a 10x microscope when viewed by an experienced diamond grader
IFInternally Flawless
No internal flaws may be seen under a 10x microscope by an experienced grader, though there may be a few minor external blemishes
VVS1, VVS2Very Very Slight Inclusions
The diamond will contain inclusions but they will be difficult to see for an even experienced grader under a 10x microscope
SI1, SI2Slight Inclusions
Diamond will contain inclusions easy to spot under a 10x microscope and may be visible to the naked eye
I1, I2, I3Included
Inclusions are visible to the naked eye
A completely flawless diamond is very rare and the price would reflect such. Diamond quality is effected by its clarity, therefore a the higher the clarity, the better the diamond.

Color: Though most people believe that diamonds are colorless, diamonds, in fact, come in every color of the rainbow. The colored diamonds, known as fancy diamonds, are even more valuable than traditional white diamonds and can be red, pink, blue, green, orange, and brilliant yellow (not to be confused with slightly yellow, which is considered to be a poor quality white diamond).
Fancy diamonds aside, white diamonds are graded on a chart and colorless diamonds are considered the highest quality. The quality ranges from colorless (letters D, E and F), to almost colorless/brown/gray (letters G, H, I and J), to faint yellow (letters K, L and M) all the way to the letter Z, which signifies a light yellow diamond. Because colorless diamonds are considered the most prized, diamond quality in the higher letters (D, E, F) are the better choice.

Cut: The fourth "C", cut, is the only "C" on which humans have any control. For the other three "C's", carat weight, clarity and color, mother nature deals her hand and we get what she gives us. Cut can play an important role in diamond quality, because a poorly cut diamond can ruin the value of a stone, and in today's world where profit is the name of the game, master diamond cutters with years of experience are in charge of diamond cutting for any reputable company.Cut refers to the geometric shape and proportions to which a diamond is pared. In the 1930's a Russian mathematician named Marcel Tolkowsky, derived a formula for which the calculations of the proportions of a diamond's facets (in a round diamond) that would bring an ideal balance between brilliance and dispersion. Since then, his formula is the calculation by which all diamonds are measured. Though the exact calculation and geometric design are much too complicated to explain, it is important to know that a round cut diamond has 57 or 58 facets (flat planes or surfaces on a diamond that must be cut in exact relation to the others to create the most fire and brilliance). Each facet must be cut an polished to the exact specifications in relation to the other facets on the stone. If facets do not match exactly, the stone it cut poorly the diamond quality decreases.

Source:http://wizard-of-jewelry.com/diamond_quality.asp
Other related sites:http://damincci.com/4c.htm
:http://spartanspirit.com/diamonds/4cs/