Damascus blades are basicly made of two different steels forged together. The joined metals are hammered flat and then folded. The process is repeated many times so that the finished piece has many very thin alternating layers. The Steel is shaped and then etched with acid (or similar) to highlight the layers.
The quality of the blade depends on the types of steel used, and the forging method. While all damascus look nice, some makes a fantastic quality user and some is rubbish.