Carat refers to the weight of a diamond. The term carat comes from carob seeds which, because of their uniform weight, were used in ancient times as measuring standards. Weighing diamonds has come a long way since ancient times, but some of the traditional terms are still used by some dealers. For example, a half-carat diamond is a two-grainer; a three-quarter carat a three-grainer, a one-carat a four-grainer, etc.
In diamonds, five carats equal one gram. For jewelry purposes, however, the carat weight of a stone is stated either in points or is written in decimal form rounded to hundredths. For example, a one-carat diamond is labeled 1.00 carat, or 100 points, a half-carat stone will be labeled 0.50 carats, or 50 points, a quarter-carat stone will be labeled 0.25 carats, or 25 points, etc.
More small diamonds are found in diamond mines than large ones. The larger a diamond, the more rarely they occur in the earth's crust, and have a higher value per carat and a greater total cost. A diamond weighing two carats will not look twice as large as a one-carat stone because the measure of a diamond is volumetric (three-, rather than two-dimensional).
If you want a large carat weight but price is an issue, consider balancing the color, clarity or cut - or all three - to achieve your goal.
The word carat should not be confused the word "karat." Karat refers to the purity of gold; carat refers to the weight of a diamond.