Diamond grading standards fall into four distinct categories, the "Four C's":
Think of these as sliding scales
While the depth of a stone will affect its "apparent" size, which is why two diamonds of the exact same weight can look vastly different in size, the carat measurement indicates its true mass and weight. With each weight category increase (quarter, third, half), the value per carat of a diamond will increase significantly (given all have the same other factors). 'Under-sizes' are diamonds that weigh just below a cutoff weight and while fewer exist, they can represent an exceptional value.
A stone which is twice as large as an otherwise identical smaller stone might be three or more times more expensive. So while you might see a price for a smaller stone at $2,000 per carat, as you price the same cut, color and clarity in a larger stone you'll see dramatic increases. When diamonds are mined, large gems are discovered much less frequently than small ones, which make large diamonds much more valuable.
In a multistone piece of jewelry, the total carat weight(tcw) is the combined weights of the stones in the item. All the stones should be of the same approximate grade. Remembering that a total weight and price is determined by the size of the individual stones making up that total weight... If the ring is all ten pointers then the per carat price would be figured on what a fair value would be for X number of .10ct diamonds...
When choosing carat size for the main stone, consider your budget first, and not how many months salary you "should spend". If you're shopping for a nice diamond for your future wife, don't start off by overspending as some twisted token of your love. Buy something you can afford, that you like. Buy something that makes you happy, invest in your happiness... ...but remember you're going to need other things, which are more practical, like furniture & a television. While not very sexy, leave something in the bank for them too! That might translate to a very nice tasteful 1/3 or 1/2 carat diamond in a well designed mounting, or it might be a nice quarter carat stone, but it shouldn't be a choice you feel compelled to measure against some marketing campaign by the DeBeers advertising agency. If you can afford a larger diamond, and want it then by all means "buy it". Just don't feel compelled by some advertisement advising you that "expressing your love means two month's salary". There are no rules, only options! It's always better to buy an attractive stone rather than a very included larger one. Since the main function of a diamond is beauty, keep in mind that bigger isn't always better. Well, not most of the time, at least with jewelry anyway :)