There are two kinds of genuine pearls available on today's market - natural pearls and cultured pearls.
Natural pearls are formed when a foreign object (like a tiny stone, but bigger than a grain of sand) has made its way into the mollusk's shell. The mollusk secretes nacre, a lustrous substance that coats the intruding object. As thousands of layers of nacre coat the intruder, a pearl is formed; this process takes up to seven or eight years (an oyster's useful life span).
"Culturing" pearls was invented in 1893 by Kokichi Mikimoto, and is a process in which man implants the intruding material, (bits of mussel shell) into the oyster. The mollusks are cared for in a protective environment ("farm") while it does its coating work, after which time they are harveseted. The longer the time spent in the oyster, the thicker the nacre.
Practically all pearls available today are "cultured" pearls.
Only one out of four cultivated oysters live to make a marketable pearl. Natural (ALL natural) pearls are quite rare and quite valuable. Therfore, the word "pearl" should be understood as "cultured pearl" unless noted otherwise.
The beauty of cultured pearls is based on their outer layer (or the entire pearl in the case of natural pearls). In cultured pearls, thicker nacre is one sign of higher quality. Pearl nacre is composed of about 90% of microscopic calcium carbonate crystals. The crystals are aligned perfectly so that light passing along the axis of one is reflected and refracted by the others to produce a rainbow of light and color. The iridescence that we commonly associate with pearls is produced by this arrangment of layers.
The outer layer of natural and cultured pearls can look very different; natural pearls are often less iridescent than cultured pearls. Pearls produce an intense, deep shine called luster.
Over the last decade or so, Chinese pearl farmers have greatly improved processes for growing cultured freshwater pearls that are made up completely of nacre. They have also developed ways to reshape pearls by repositioning them during the growth process to result in more perfectly rounded ones. Akoya pearls, produced by small Japanese oysters, are implanted with spherical beads carved out of natural shell, resulting in pearls that are characteristically rounder than freshwater pearls.
Above is a photo of a worker grading pearls for the commercial market.