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Flawless – Best clarity possible, A Flawless diamond doesn't hold any internal or external Inclusion of any kind.
Imperfect – Worst Clarity, An imperfect diamond holds visible internal or external Inclusions.
In assessing the degree of a diamond`s clarity, internal and external inclusions are also being considered.
The factors that determine the degree of clarity are Inclusion size, defect location, number of inclusions, shade of a inclusion, type of inclusion, and the shine of Inclusion.
Internal inclusions are more significant than external inclusions which in some cases cause a partial degrading in quality of cleaning and not in clarity.
Clearly, as close as the diamond is to be flawless the more expensive it gets, but unlike the color of the diamond, a person who is not qualified, will find it difficult to notice differences in the level of clarity of a diamond. 

It is important to emphasize that the clarity classification will be determined only if the following requirements will be held:
• The classification is determined by a qualified and authorized professional.
• The classifying Professional will use means of magnification that increase times 10, and will always consider what appears in that magnification.
• The classification process will be held in appropriate lightning conditions
• The classifying professional will be in good physical condition, alert and in good mood

Examples for external inclusions: scratches: by the polishing wheel. signs of burn: overheating in the process of polishing. Natural: unprocessed section of a polished stone. Groove: missing small parts of material in the stone. extra facet: surface caused by additional polishing.

Examples of internal inclusions: a crystal (crystal of the material inside the diamond), Nate (crystal of diamond within the diamond),
Pinhead (a tiny crystal in the stone),
Cloud (strips of crystals or other inclusions in the stone),
fracture (a fracture throughout the kernel),fringes
(small fracture in the Rowdiest area).

levels of clarity:

Diamonds in classification FL are clean of all internal or external flaws. 
When they will be classified in the proper conditions as stated above, no inclusions will be found  what so ever. These diamonds are rarer than diamonds that are lower ranking and much more expensive.
Despite being the highest level ranking there are still some flaws, which are considered least significant, that can appear and not prevent the diamond from being classified FL.

IF – (Internally Flawless)
This type of diamond is also rare and very expensive
What differs the IF diamonds from the FL is the slight external inclusions that may appear in the IF diamonds. These inclusions are not always removable by light brushing. The price differences between IF and FL diamonds is not substantial

VVS1 and VVS2 –Very Very Slightly/Small Included.
Extremely small inclusions which nearly impossible to identify by a times 10 magnification. In VVS1 classification, inclusions are ether visible only through the pavilion (the lower section of the diamond) or they are small enough to be polished. In VVS2 classification, inclusions are also visible through the crown (top section of the diamond).

VS1 and VS2- Very Slightly/Small Included
Very small inclusions which are very hard to identify by a times 10 magnification.
Obviously, In VS1 classification it will be harder to identify the inclusions compared to VS2. Small crystal small clouds, small fracture, are very typical for this rank clarity.

SI1 and SI2- Slightly/Small Included
Small inclusions which are easily detected (SI1- through the crown , SI2 – through the pavilion), by a times 10 magnification. For some SI ranks it will be possible to view the inclusions without any magnification at all.
An additional clarity classification is SI3 which is not recognized in all gemological institutes but used in trade. This ranking comes to negotiate the large gap that exists between rank SI2 and I1.

I1, I2 and I3- Imperfect
Inclusions which can be detected without the need of time 10 magnification
These Diamonds are very common in trade for they are less expensive and if they are in good color classification, they can look excellent and only a skilled gemologist could notice it`s inclusions.