Diffuser usually refers to a sheet of clear, diffusing material. As the term “diffuse” would suggest, a diffuser makes angles of light shoot out in a bunch of random directions. Another way of saying this is that it “scatters” light. Diffusers are often sheets of clear material, but they can also be custom created by adding a textured surface to an already existing part.
If the lit appearance has lots of unevenness — dark and bright parts next to each other, or color variation — a diffuser can help even that out. Or, if you are using the diffuser in an illumination application and you want to light up a bigger area in front of your lighting fixture (larger beam angle), diffusers can do that, too.
For many commercial off-the-shelf diffusing materials, there are mathematical models that can be imported into optical simulation software. So, if you want to add a diffuser to your hardware, you can see the effect it would have in an optical simulation. This can be done before you select and buy the diffuser you want (there are many to choose from) and build a prototype.