Damascus... 2 kinds there are:
One is "true" Damascus, sometimes known as Wootz (apparently "wootz" is a name made up by Bitish, just like "China" and "Japan"...). Wootz was originated by Indian. In fact, it was Syria's capital to follow the name, as it was once an important centre for wootz trading. With the right steel and the right skill, it would "Naturally" develope carbide banding, results in a beautiful pattern visible on the surface of a blade.
(There is a good article on this topic. Please check:
http://umc.tms.org/pubs/journals/JOM/9809/Verhoeven-9809.html )
However, since the art of wootz exists no more, all we have left is "forge" damascus these days, what Malazo mentioned.
One thing about the art of forge damascus in the west, is that it was supposingly resurrected by Bill Moran, a master American smith, just a few decades ago.
The Japanese art of forge damascus has once lost too, after what they call the "Kotou" period. Not until the "Shinshintou" period, scholars suggested smiths should mix "Tamahagane" (samurai sword's major material) with old nails (!) Then the Japanese art of forge damascus resurrected.
(For more information on "samurai sword damascus", please refer to this "interesting" site:
http://www.hi-net.zaq.ne.jp/osaru/e_index.htm
[this one is kind of "difficult" to read... Nevertheless, very informative.])
Today, damascus steel is pretty much considered as an artistic item rather and anything of real functional use (we're just not willing to scratch one!). Of course, a smith manages to forge things in beautiful damacus should as least be able to produce a knife with good mechanical qualities. However, one may easily found knives with jolly good properties without using damascus, no need to mention less buck is involved...
(ps. one small point on the "folding" of damascus. As a smith folds and welds a sheet steel back to itself repeatedly, the carbon content within becomes more evenly distributed. A more homogenous piece of material is less likely to give a "weak-point" for which to "break", and this gives rise to "extra strength" of the material.
However, there is a limit in this folding. As we all know, longer a piece of steel stays in a furnace, more carbon content will be lost. It is the carbon that gives the hardness of the steel, that what makes a knife "cuts". Should a steel be folded too many times, it would run out of carbon and becomes a crap knife...
Generally speaking, a Japanese smith will fold his steel for 10 to 15 times. Let's imagine a blade folded for 10 times will produce 2^10 = 1024 layers, that should be good enough, shouldn't it?)
