The bending and spreading of light waves when they pass the edge of an object or go through a small opening. In photography, diffraction happens at the edges of the lens aperture. At wide and medium apertures the effect is too small to see. At very small apertures, such as f/16 or f/22, a larger share of the light is bent, and the whole image becomes slightly less sharp. For this reason, many lenses give their sharpest results a few stops below their widest aperture, not at their smallest.
Do you have a better definition? Share it in the comments.