The clarity of a diamond refers to the level of imperfections in the stone. All diamonds have imperfections which can vary from minute inclusions to heavy inclusions. Internal flaws can make the diamond look dull and cloudy, the fewer imperfections a diamond has, the more flawless it is, which results in the stone being of higher value.
However, take into account that most internal inclusions are not visible to a naked eye. The clarity of the stone is inspected under a 10x magnification by a professional.
The scale in which the clarity of a diamond is measured varies from FL (Flawless) to I3 (Inclusions) which may be visible to the untrained eye.