The feasibility of optical recording by irradiating diamond with energetic ion beams has been investigated. The radiation damage in the exposed target areas provides sufficient optical contrast to the unexposed parts as to distinguish analog or digital patterns by visible light. The physical properties of the radiation effects have been studied by a variety of experimental techniques, including optical transmission and luminescence, photo-thermal deflection spectroscopy, infrared and Raman spectroscopy, and ion beam channeling in conjunction with atomic force measurements. The important result is that permanent data storage in diamond is possible with high pixel densities. A unique feature of diamond, irradiated up to and beyond a critical ion fluence, is the thermal phase transformation to its allotropic form of graphite. This feature can be used to enhance optical contrast at sub-amorphization irradiation levels. Estimates on the pixel density of data recording in diamond are presented and the necessity of developing large-area diamond wafers of high optical quality is emphasized.