The Diffuse render element displays the diffuse color component of objects in the scene.
When on, the diffuse render element displays the color of objects after lighting has been applied.
The Lighting checkbox defaults to off.
When Lighting is turned off, the element displays the diffuse color of objects before the lighting gets applied. For textured objects, this will look like a 3D projection of the texture. However, objects with a single color will look “flat”.