Diffraction is an effect on waves when encountering an obstacle or opening. For example, when a light wave hits the edge of something, some of the light is diffracted, redirecting it around the edge.
Diffraction affects the resolving ability of telescopes, such that the larger its aperture, the smaller is its smallest possible object that can be resolved. A telescope is said to be diffraction limited if all its other optical properties are good enough that diffraction is its main limitation in resolving images.
Diffraction also affects particles as per quantum mechanics' particle/wave duality.
Much effort has gone into characterizing the effects and theories and models include:
Refraction, on the other hand, is the change in direction of a light ray as it passes between two materials with different densities and is the mechanism of lenses.