Diamond Ore

Diamond ore is generally considered to be the most valuable and elusive block in the game. It can be found in a vein of 1-8 blocks (with larger concentrations obviously being more rare). Diamond shows up at elevations ranging from 1 to 19 blocks above the bottom of the map (for comparison, sea level is around 64 blocks above the bottom of the map). Below elevation 18, it occurs in roughly 0.08% of rock. This means that you must check 867 blocks below elevation 18 to have a 50% chance of finding at least one diamond ore. It can be mined for a diamond gem using an iron or diamond pickaxe. The diamond gems can be used right away in a Crafting Table to craft diamond tools, weapons and armor, which are currently the most durable in the game. These, along with coal, flint, Lapis Lazuli, and redstone ore, do not require any smelting and can be used immediately. Diamond blocks can be crafted by placing nine diamond gems together in a 3x3 square using the workbench.

Diamond ore cannot be found or placed in Classic as of version 0.30 and it drops 1 Diamond (Gem) in Indev, Infdev, Alpha and Beta.

The Ore
Unlike gold and iron ore, when you break the diamond ore it doesn't come inside your inventory in "ore" format. It's alredy a gem.

Trivia

 * Diamond Blocks are most often found in lava caves but they also spawn in water caves, caves, and also in solid stone.
 * When diamond was first introduced, it was called emerald.
 * If you were to obtain diamond ore via inventory hacking, smelting it will give you the diamond gem.
 * In multiplayer, diamond and gold ore can sometimes be generated in unusually large clusters.