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Clarity

Nature being what it is, diamonds may show peculiarities of crystallization which could include small traces of other minerals trapped during the crystallization process.  These may show up as tiny black or white marks. These natural characteristics are called "inclusions:" - nature's fingerprints.
The clarity grade ordinarily is determined by judging the relative visibility of inclusions hen viewed in the face up position.  The more visible the inclusion the lower the clarity grade.
The number, size and position of any inclusion determines the Clarity of a diamond.  The fewer the inclusions the rarer it will be, and the more light will reflect, making it more valuable.  Since it's very rare to find a diamond that is flawless, the closer to flawless the more expensive.
As with color, there are internationally agreed and accepted standards of clarity.  The two systems most commonly used are listed below.

INTERNATIONAL CLARITY GRADING SCALES
C.I.B.J.O. G.I.A.  
Loupe Clean   IF Flawless
Internally Flawless
VVS1
WS2
VVS1
VVS1
Very, Very Small Inclusions
Very, Very Slightly Inclusions
VS1
VS1
VS1
VS1
Very Small Inclusions
Very Slight Inclusions
SI1
SI1
SI1
SI1
Small Inclusions
Slight Inclusions
P1 I1 Piqué 1
Imperfect
P2 I2 Piqué 1
Imperfect
P3 I3 Piqué 1
Imperfect

Loupe Clean, F.L.(Flawless) grade=
A diamond without external or internal flaws or blemishes. Examined with a 10x corrected loupe.

LF ( internal flawless) grade =
A diamond without internal imperfections or flaws, but minor surface blemishes.
Examined with a 10x corrected loupe.

VVS1, VVS2 grade =
Diamond with minute surface or internal blemishes that are difficult to locate with a 10x corrected loupe.

VS1, VS2 grade =
Diamonds contaning minor inclusions clearly visible under 10x magnification, but not visible to the naked eye.

SI1, SI2 grade = Diamonds with inclusions which are fairly easy to see under 10x magnification, but not visible to the naked eye.

P1 I1 grade =
Diamonds having inclusions which are quite obvious under 10x magnification and can be seen with the naked eye.

P2, I2 grade =
Diamonds with inclusions, which can easly be seen with the naked eye and which begin to affect the transpatency and brilliance of the diamond.