It reduces the heat that reaches the bottom of the pan, and provides more even heat distribution. It takes the place of a double-boiler.
You put it on top of the burner, then the pot on top of it. It will work with both gas and electric burners. It’s good for cantankerous gas stove burners on which you need really low heat, but the flame goes out if you lower it too far down, and it can be used to help reduce worries about using clay pots such as Japanese donabes on the stove top.
There are several different types.
One type is made of two pieces of flat metal, both perforated, with an large air space between. These are often made of chromed sheet metal, and may rust, so though they are cheap and cheerful and do the job just fine, don’t expect them to last a life-time. Some are not perfectly flat.
Another type has the two sheets of metal closer together, with a few slats instead of perforations, and may be enamel coated. You can get them made of cast iron.
Either kind will have a heat-proof handle by which you hold and move it.
Heat Diffuser can also refer to a reflector shield built into the top of some ovens in North America, designed to diffuse the heat that comes from the broiler burners at the top of the oven.