Cubic Zirconia, contrary to public belief, can be found in the natural world but is extremely rare. Cubic zirconia was first discovered in 1937 by two German mineralogists but in very minute quantities.  It wasn't a significant find and was soon forgotten. 
  Then in the early 1970's Russian scientists began to grow cubic zirconia under laboratory conditions, not for jewelry making but for industrial use and space technology. Because of its similarities to mineral gemstones it wasn't long before attention was focused on the jewelry possibilities of this new man made material. One of the ways to tell the difference between a cubic zirconium and a real diamond is to look at the cubic zirconia under a 10x magnification. You can see the facets do not point properly and where facets intersect, it is not a straight line, but the intersection is more rounded than the diamond's facets. Other ways to tell the difference are doing a specific gravity test on an un-mounted stone, marking ink on the top of the stone (the ink beads up on a cubic zirconia), when gem-printed a cubic zirconia photograph's reflective and refractive patterns, and when measuring heat conductivity, a cubic zirconia registers red on the indicator (a diamond is green).
   Cubic Zirconia comes closer than any other material to matching the characteristics of a diamond. It is often hard to distinguish the difference with the naked eye, but there are a few technical differences.
FIRE & BRILLIANCE: CZ has slightly less brilliance (liveliness and sparkle) than diamonds, while having more fire (flashes of rainbow colors).
HARDNESS: CZ has a scientific hardness rating of 8.5 on the Moh's scale. Diamonds have a rating of 10.
CARAT (WEIGHT): CZ is about 75 percent heavier than a diamond.
COLOR: Beyond classic white, CZ is now available in many fashion colors, such as lavender blue, amethyst, canary yellow, pink, emeralds green, sapphire blue and ruby red.
CUT: The finest CZ is machine cut to exacting tolerances that duplicates the diamond-cutting process. Like a diamond, CZ can be chiseled into a variety of fashion shapes and cuts.

  The biggest giveaway is weight. A 1 carat diamond weighs 1 carat. A comparable sized (in volume) cubic weighs 1.75 carats. A cubic zirconia can be scratched by diamond, topaz, ruby or sapphire whereas a diamond can only be scratched by another diamond.
The optical differences make comparisons between these two stones very interesting. A diamond displays more brilliance, whereas a cubic zirconia has more fire (disperses light further, see picture). 

  Even though a cubic  has more fire, it is far more intense than a diamond's fire which shows a more color balanced "natural" fire.
The other big difference to consider is that 99.9% of diamonds are imperfect in some way or another and this adds to their overall character and cannot be easily be reproduced by cubic zirconia.  
A colorless diamond is extremely rare - they usually have some kind of yellowish tint which on most occasions isn't apparent to the naked eye - a cubic on the other hand is almost perfectly transparent.

   The processing of zirconia involves the separation and removal of undesirable materials and impurities - in the case of zircon - silica, and for baddeleyite, iron and titanium oxides.  There are several routes to the extraction of zirconia from zircon including:
·   Chlorination
·   Alkali oxide decomposition
·   Lime fusion
·  Plasma dissociation