Refer to figure.
The main purpose of the diffuser is to maintain the constant mixture ratio across a wide range of engine speeds (low and high power settings). It is fitted right after the main jet linking the carburettor’s floating chamber and the venturi. If there’s a larger mass of air entering the venturi, the pressure drop will be excessive at the venturi throat, which will result in a larger addition of fuel making the mixture too rich. To avoid this imbalance, air from the pressure balance duct is fed through a drilled tube (tube with holes) which is the diffuser. The diffuser’s openings are precisely dimensioned to guarantee that the correct mixture ratio is maintained across the entire engine’s speed range.

When the engine is running at idle, the levels in the diffuser and float chamber are almost equal. However, when the engine is running, the fuel level in the diffuser drops because of the slight restraint caused by the carburettor’s jet. This will uncover some of the diffuser’s openings allowing air from the pressure balance duct to flow in. This reduces the pressure at the nozzle, thus reducing the fuel flow and allowing a balanced mixture.