What is diatonic substitution? How is it used in improvisation?
Diatonic substitution is changing a diatonic chord into another diatonic chord with a similar function. For example, in a C major tonality, you can often reharmonize a melody harmonized with F[maj7] with Dm (or vice versa). These chords share some important notes which makes them functionally similar (both have subdominant character).
Chromatic substitution, on the other hand, is substituting a chromatically altered chord for a chord. For example the tritone substitution, that is, playing a Db7 instead of a G7 is a chromatic substitution. These two (enharmonically) share their third and seventh, which makes them somewhat similar in function (both have dominant character).
You can use substitutions while improvising a "comping" to give the soloist some more possibilities (or a hard time, if he's not skilled enough!). Melodies sound different when played over different chords and it adds variety.
You can also use substitutions when soloing. You can use the scales implied by the substitute chord instead of the actual one. It gives you some more possibilities to add color, variety and tension.