Diplomatic events initiate some sort of...diplomacy...between factions. This could be a chance at an alliance, trade, or something completely different. They usually have some other quirk (one of or both of the options) to make them distinctly different from standard diplomacy, as well as a lovely bit of backstory which we all love 
. Here is a great exapmle, for Dunland:
. Here is a great exapmle, for Dunland:cezarip wrote:Do we fight for Isengard?
TRIGGERS: Isengard turned evil and in war with Rohan
Chieftain, our people want revenge. The lands of Rohan were by right ours, we want them back! It may be not wise to declare our intentions yet. The enemy of our enemy may be our friend. Isengard is in war with Rohan and they have offered to be our allies. In exchange, our people could fight under the white hand's flag until we are ready to fight them in the open. Until the time comes should be ally with Saruman and send our warriors to fight under his flag?
YES: alliance with Isengard, -500 population in each city, Isengard can recruit Dunland units, +1000 gold per round payment from Saruman, the king gets +1 dread
NO: increased relations with Rohan, the king gets +1 authority and all FM +1 chivalry