Jewelry & Diamond Industry Dictionary of Terminology
A blemish is a locational term, which is to say a blemish is found on the outside of a gem, whereas inclusions are located inside a gem. Blemishes occur after a diamond’s formation, during the cutting, mounting, and wearing of a polished diamond. Extra facets, polish lines (thin parallel grooves and ridges) or burns (from excessive heat on the polishing wheel during cutting) are examples of blemishes introduced during the manufacturing process. Nicks, scratches, chips and abrasions are examples of blemishes introduced during the handling, mounting or wearing of a diamond. Chips are shallow openings where part of the diamond was broken off, most often at the girdle edge.
Sources for these definitions are GIA.edu, Google.com, Meriam-Webster.com, and Wikipedia.org.