The clarity grade of a diamond is assigned by  trained professionals, based on their visual examination of the gemstone under 10 power magnification.  The size, location, number and color of inclusions all impact on the clarity grade.

Some ask, "If you can't see it why is it important."

To answer this question properly we must first examine why we facet a gemstone in the first place.  A diamond is cut to maximize the return of light. 

Think of it like a house of mirrors.  We want the light that enters the diamond through the top to to be reflected off the facets on the bottom of the stone and then returned to our eyes.  Obviously anything that gets in the way of the transmission of this light will decrease the brilliance of a diamond.  The more inclusions the less brilliance.

The less inclusions, the rarer the gemstone and the higher the value.