Agarwood has made its  way from Southern Asia to Arabia by way of the spice caravans, and is  known as “oud” in the region, which is also the name for wood, and for  an Arabic musical instrument resembling the lute. The nomadic cultures  of the Arabs and Bedouins have grown fond of oud’s fine and intense  aroma and use it for both religious purposes and for pleasure. Oud has  become an inseparable part from Arabic culture.
Oud chips and  incense are burnt in an incense burner called mabakhir during the holy  month of Ramadan, after breaking the daily fasting with a meal and  showering, and before the evening prayers at the mosque. It is also  incorporated into the Hadj ceremonies and is burnt during Eid.
Burning  oud is considered a great honour, and is part of the customs of guest  welcoming (when the host can afford it!). Hospitality is a custom that  is held in much regard, and is considered a virtue  in Arabia and in the  Middle East. The hosts share their best commodities with their guests,  no matter how rich or poor they are. What began out of necessity for  survival in the desert by offering clean water and a feast to break the  wonderer’s hunger has evolved into entertaining with more precious  commodities such as coffee, sweets and burning the finest and most  precious incense the host possesses.
Oud is also used to scent  clothing by saturating the garments in agarwood smoke, a custom that  interestingly enough is common to both Arabia and Japan.
Grading: Agarwood manufacturers  classify agarwood into four distinct grades:
Grade 1 Black/True Agar:  mainly exported to Arabia as incense  Grade 2 Bantang: mainly  exported to Arabia as incense  Grade  3 Bhuta or Phuta: sometimes  extracted for a superior oil  Grade  4 Dhum: used for oil   (Source: 
Cropwatch)
Perfumery:The Arabs are  particularly fond of oud oil, dehn al-oud, which they use as a personal  fragrance. Because alcohol is forbidden in Islam, Arabian perfumes are  traditionally either essential oils that are worn neat on the skin, or  based in an oil carrier.
Agarwood is the most expensive natural  essence known in perfumery, and therefore mostly been used by the  royalty or nobelty, or wealthy merchants. Agarwood is more often than  never used as a single note from a specific country and grade. And less  often it is blended with other notes such as rose, sandalwood, musk,  ambergris, etc. And as mentioned in the 1st part of the series, it is  not uncommon for the oil to be adulterated with lodh oil and several  synthetics.
Oud is also used in a lesser extent in Indian  perfumery. I have with me a sample of “musk oud attar”, which is a very  dark, musky, animalic oud distilled with other secret plant materials  into sandalwood oil. It has great tenacity and longevity.
Agarwood  is an unusual woody note that is rarely used in perfumery, because of  it prohibitive cost. There is an increased interest in agarwood in the  past decade, perhaps triggered by the release of M7 by YSL in 2002,  which was the first Western commercial perfume to use agarwood as a  distinct note. Until than, agarwood oil was mostly used by Arabian  perfume companies (i.e.: Ajmal, Arabian Oud, Madini, Rasasi) and the odd  niche perfume house (i.e.: Montale’s oud line).
Agarwood is used  in luxurious Oriental and woody compositions. It creates a sensual,  resinous-animalic or clean-woody warmth and blends well with resins,  balsams, spices and precious florals to make outstanding perfumes. A  little touch of agarwood can turn an otherwise simple and ordinary scent  into a magical phenomenon.
Examples for contemporary perfumes  with agarwood:
M7
Oud  Abu Dabi
Oud Wood
Arabian  Aud (Ayala Moriel) - one of a kind
Click  here for more perfumes I've created containing 
agarwood.
P.s. We will come back later with more insights on oud in perfumery.