Gemstones have attracted humankind since ancient times, and have long been used for jewelry. The prime requisite for a gem is that it must be beautiful. The beauty may lie in colour or lack of colour; in the latter case, extreme limpidity and “fire” may provide the attraction. Iridescence, opalescence, asterism (the exhibition of a star-shaped figure in reflected light), chatoyance (the exhibition of a changeable lustre and a narrow, undulating band of white light), pattern, and lustre are other features that may make a gemstone beautiful. A gem must also be durable, if the stone is to retain the polish applied to it and withstand the wear and tear of constant handling.

In addition to their use as jewelry, gems were regarded by many civilizations as miraculous and endowed with mysterious powers. Different stones were endowed with different and sometimes overlapping attributes; the diamond, for instance, was thought to give its wearer strength in battle and to protect him against ghosts and magic. Vestiges of such beliefs persist in the modern practice of wearing a birthstone.

Except for diamond, which presents special problems because of its very great hardness (see diamond cutting), gemstones are cut and polished in any of three ways. Agate, opal, jasper, onyx, chalcedony (all with a Mohs hardness of 7 or less) may be tumbled; that is, they may be placed in a cylinder with abrasive grit and water and the cylinder rotated about its long axis. The stones become polished but are irregular in shape. Second, the same kinds of gemstones may instead be cut en cabochon (cabochon cut) (i.e., with a rounded upper surface and a flat underside) and polished on water- or motor-driven sandstone wheels. Third, gemstones with Mohs hardness of more than 7 may be cut with a carborundum saw and then mounted in a holder (dop) and pressed against a lathe that can be made to revolve with extreme rapidity. The lathe carries a point or small disk of soft iron, which can vary in diameter from that of a pinhead to a quarter of an inch. The face of the disk is charged with carborundum grit, diamond dust, or other abrasives, along with oil. Another tool used to grind facets is the dental engine, which has greater flexibility and sensitiveness than the lathe. The facets are ground onto the stone using these tools and then are polished as described above.

Of decisive significance for the modern treatment of gemstones was the kind of cutting known as faceting, which produces brilliance by the refraction and reflection of light. Until the late European Middle Ages, gems of all kinds were simply cut either en cabochon or, especially for purposes of incrustation, into flat platelets.

The first attempts at cutting and faceting were aimed at improving the appearance of stones by covering natural flaws. Proper cutting depends on a detailed knowledge of the crystal structure of a stone, however. Moreover, it was only in the 15th century that the abrasive property of diamond was discovered and used (nothing else will cut diamond). After this discovery, the art of cutting and polishing diamonds and other gems was developed, probably in France and The Netherlands first. The rose cut was developed in the 17th century, and the brilliant cut, now the general favourite for diamonds, is said to have been used for the first time about 1700.

In modern gem cutting, the cabochon method continues to be used for opaque, translucent, and some transparent stones, such as opal, carbuncle, and so on; but for most transparent gems (especially diamonds, sapphires, rubies, and emeralds), faceted cutting is almost always employed. In this method, numerous facets, geometrically disposed to bring out the beauty of light and colour to the best advantage, are cut. This is done at the sacrifice of material, often to the extent of half the stone or more, but the value of the gem is greatly increased. The four most common faceted forms are the brilliant cut, the step cut, the drop cut, and the rose cut.

In addition to unfaceted stones being cabochon cut, some are engraved. High-speed, diamond-tipped cutting tools are used. The stone is hand-held against the tool, with the shape, symmetry, size, and depth of cut being determined by eye. Gemstones can also be made by cementing several smaller stones together to create one large jewel. See assembled gem.

In some cases, the colour of gemstones is also enhanced. This is accomplished by any of three methods: heating under controlled conditions, exposure to X rays or radium, or the application of pigment or coloured foil to the pavilion (base) facets.

In recent times various kinds of synthetic gems, including rubies, sapphires, and emeralds, have been produced. Two methods of fabrication are currently employed, one involving crystal growth from solution and the other crystal growth from melts.