Note: Information might not be accurate and will be changed later
Gems can raise your dragon's stats. A maximum of 5 Gems can be equipped onto a single dragon. They can not be taken off unless you have enough Diamonds. It's 10 diamonds to take off a single gem. if you want take it off, click on gem instead of using Gem Slot Reset because it will throw away very gem and you cannot recover it.
Gems get stronger when you proceed later on but their appearance to drop is lower. Some gems can be found in Estella, Dungeon, Dream World. The gems drop much lower as the story progresses. If you want to upgrade it you need Sky Crystals, Synthetic Stone, Gold. It is done in Magic Shop (DV)
Note: Information might not be accurate and will be changed later