There are three main groups of sharpening stones: oil stones, water stones, and diamond stones. Each type of stone has its own advantages that help bring a sharp edge to whatever tools you are sharpening.
Oil stones are the traditional Western sharpening stone. They are probably the most common sharpening stone available on the market, although water stones are becoming increasingly popular.
The oil stone is so named because you first need to oil (lubricate) it before introducing a steel edge to it. Lubricating the stone reduces friction and helps to ease the movement of the tool as it is being sharpened. Much of the metal removed (swarf) will remain in the oil which makes it easy to wipe off when you finish..
Oil stones are available in a wide variety of grit sizes and materials and they are available in both natural and synthetic varieties.
Water stones are relatively new to the Western world. They have been growing in popularity because of their many advantages.
Water stones must be soaked in water for several minutes before use. Soaking the stone acts as a lubricant and helps to ease the movement of the tool being sharpened. Much of the metal particles (swarf) will remain in the water allowing you to simply wipe it away after sharpening.
Water stones, like oil stones, are available in both natural and synthetic varieties.
Diamond stones are not, in fact, stones but rather thin metal plates which have very small diamonds attached to the face of the plate.
These industrial diamonds are embedded into the metal plate and are harder than any other type of natural or synthetic sharpening stone.
Diamond stones typically have perforated surfaces to capture the swarf (ground metal) though there are models without. They are also available in various grades and levels of abrasion.
The chief advantages of using diamonds stones are that they are very fast at sharpening and they retain their flat shape much more easily than a stone, which can become curved or hollowed due to the sharpening process.