How do diamond blades work?  

Although we say "cutting rock", diamond blades don't actually cut, they grind! The diamonds are supported by the metal matrix, and the exposed bits of diamonds grind a kerf onto the material. A kerf is the width of the material that is removed in grinding.

If the diamond blade keeps on grinding and is used for a long time, the diamond and metal bond will slowly wear out, exposing new diamond bits. This cycle will go on until no diamond is left on the rim. When the diamond is consumed and the blade won't grind anymore, that's the time when you have to replace your blade.

Wet or dry cutting?  

In certain instances, like using other kinds of diamond blades in construction, or when cutting softer materials like asphalt or cement, a diamond blade may cut dry.

However, it is not the case when it comes to cutting rock and gemstones. In lapidary, a saw and a diamond blade can only be used in wet cutting. This is crucial in preventing friction or heating up between the blade and the rock. It will also make the blades last longer.