Gems

Gems are a valuable material that can be found in veins underground, embedded in Stone blocks or in clusters on the sides of Stone blocks, which will drop the gem when mined. As of 1.2, all gems can be placed after being mined.

Gems can also be found in greater quantities in underground mini-biomes. (More information still needed)

Each gem type can be used to create a Phaseblade of the matching color, though each color Phaseblade has identical attributes. Gems can also be combined with torches to create a colored torch. Topaz can also be used to craft the Sandgun, and Rubies can be used for the Gold Crown. With the 1.2 update, 15 of any gem may be crafted into a colored grappling hook at an anvil. This can be used to avoid farming skeletons and piranhas for hooks.

Gem rarity is not affected by depth; you will find as many gems near the surface as right above the Underworld. However, gems are far more common in the Underground Jungle. Some gems are less common than others; refer to the list below for each gem's rarity, in descending order.

With the 1.2 update, it is possible to spot a Mini, Mini, Mini Gem biome. It is filled with 3/4 differend gems (picture coming soon).

Types
In order of rarity and value (rarest at the top):

History
Gemme Gem Gem Драгоценные камни