The Microsoft Clustering algorithm first identifies relationships in a dataset and generates a series of clusters based on those relationships. A scatter plot is a useful way to visually represent how the algorithm groups data, as shown in the following diagram. The scatter plot represents all the cases in the dataset, and each case is a point on the graph. The clusters group points on the graph and illustrate the relationships that the algorithm identifies.
After first defining the clusters, the algorithm calculates how well the clusters represent groupings of the points, and then tries to redefine the groupings to create clusters that better represent the data. The algorithm iterates through this process until it cannot improve the results more by redefining the clusters.
You can customize the way the algorithm works by selecting a specifying a clustering technique, limiting the maximum number of clusters, or changing the amount of support required to create a cluster. For more information, see Microsoft Clustering Algorithm Technical Reference.