Color of diamonds refers to how much yellow shows up in the diamond. The less yellow there is, higher the value. The most valuable diamonds are totally clear. There are more yellowish diamonds available which look really nice in cocktail rings, but are usually considered inappropriate for engagement rings. However, this D to Z scale is continuous.
Clarity is a measure of how much and how many flaws there are in the diamond.
Every diamond that you will see has some sort of a flaw in it. Never the less, fewer the flaws, more valuable the diamond. And again, as for color, there are several grading systems developed, of which you'll encounter most likely only the GIA's. The I diamonds have inclusions which, by definition, can be seen by a naked eye. You need to take a look at a few of them before you will start seeing them if you are not used to looking at diamonds.