The carat weight measures the mass of a diamond. One carat is defined as 200 milligrams (about 0.007 ounce avoirdupois). The point unit—equal to one one-hundredth of a carat (0.01 carat, or 2 mg)—is commonly used for diamonds of less than one carat. All else being equal, the price per carat increases with carat weight, since larger diamonds are both rarer and more desirable for use as gemstones.
The price per carat does not increase linearly with increasing size. Instead, there are sharp jumps around milestone carat weights, as demand is much higher for diamonds weighing just more than a milestone than for those weighing just less. As an example, a 0.99 carat diamond may have a significantly lower price per carat than a comparable 1.01 carat diamond, because of differences in demand.
Total carat weight (t.c.w.) is a phrase used to describe the total mass of diamonds or other gemstone in a piece of jewelry, when more than one gemstone is used. Diamond solitaire earrings, for example, are usually quoted in t.c.w. when placed for sale, indicating the mass of the diamonds in both earrings and not each individual diamond. T.c.w. is also widely used for diamond necklaces, bracelets and other similar jewelry pieces.
Single most important thing to remember about Carat is that it refers to the weight of the diamond - not the size.