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From Diablo Wiki
Gem
,→Gem Effects
So what do gems do? Their effects vary, but are logical: Gems placed into weapons generally add [[damage]], while gems in [[shield]]s provide [[resistance]], and gems in [[helms]]/[[body armor|armor]] add to [[hit points]] or other [[attribute]]s. Exactly how much benefit a socketed gem provides depends on the quality of the gem.
[[Image:gemmed-hat.jpg|left]]You can see how gems look in an item here in this shot. The [[socket]]s display down the left side of the image for all socketed items, and if they are filled the gem is visible there, rather than an empty hole. Socketed gems in an item glow nicely, as you can see from the sapphires in this helm, and the info detailing their effects is displayed in blue, below the normal stats for the item. Socketed items in the game appear brightly-coloured, and their appearance is based on the first gem socketed. An item with an [[Amethyst]] first, then two [[Emerald]]s will be purple, not green. When you socket an item it just drops in and the item changes colour; there isn't any flashy light show.
The bonuses from gems of the same type stack, so if you had two [[rubies]] in a sword, the [[fire]] damage would be added together. It is arithmetic, never geometric, so if you had say three [[sapphire]]s, all of them chilling for 3 seconds, you wouldn't move up to freezing the monster, you'd just chill it for longer. The same goes for other gems. For example rubies add fire damage to your attack. Three perfect rubies would do a lot of fire damage, but they wouldn't create a small firewall under the monster.
Gems in shields do nothing for the Paladin's Smite attack.
==Gem Stats (Expansion)==