Diffusion Gels & Materials
In the context of lighting, diffusion means to spread the light beam out and make it more random.
When you have a single source of light like the sun, the resulting light is very directional and will create shadows where the light does not fall. On an overcast day, water particles in the clouds diffuse the sunlight and make it appear to be coming from the whole sky (reducing shadows in the process).
Video lights tend to create directional light. In some cases this is desirable but sometimes this type of light can be too harsh. In particular, you don't usually want strong shadows on a person's face.
One way to mitigate this problem is to use some sort of diffuser. This usually comes in the form of a gel, filter or piece of material which is placed in front of the light. Professional light fixtures have special holders or clips on the barn doors to attach gels and filters. Wooden clothes pegs can also be used.
More elaborate setups might use large sections of diffusion material mounted in a frame, or in a "softbox" like those pictured here.
You can also bounce light of walls, ceilings and materials (e.g. foamcore) to create different diffusion effects.
Warning: Always be very careful when mounting any gel or material near a light. Lights can get very hot — avoid flammable material and never attach plastic pegs to a light fixture.