Diplomacy refers to the practice of conducting peaceful international relations. Diplomacy is the main tool for implementing foreign policy. It has been said the war is the failure of diplomacy. With that in mind, you can think of diplomacy as the art of negotiations between different nations.
Most diplomacy is done through official diplomats. Most nations have an embassy and ambassador in most other nations for the purpose of carrying out diplomatic agendas. Diplomats function as the official channels of communication between nations. They can carry out negotiations, promote foreign policy agendas, and mediate potential disputes. This is typically done to establish and maintain mutually beneficial relations between different countries.
There are also more subtle means of diplomacy. This might involve attempts to influence other nations through non-official channels, such as academic exchanges, social activism, and even international sporting events. Diplomacy of this sort is conducted when matters are too delicate to be handled out in the open.
Diplomacy can also involve economic tools. The granting and withholding of foreign aid is a common way that wealthy nations attempt to influence less affluent nations.
Sometimes diplomacy can be more threatening in nature. Commonly referred to as "gunboat diplomacy," a country may attempt to influence another through the conspicuous display of military power. The implied threat is that if the other country does not fall into line, an open conflict may result.
As you can see, diplomacy is about communication between nations. It can take many forms and often must be handled delicately. If appropriately applied, diplomatic relations can result in mutually beneficial relations between nations and prevent outright hostilities.