Generally speaking, diction is just word choice. Which words is the author using, and what's their effect?
Should you call your crush "sweetie," "dearest," "darling," "beloved," "boo," "sugar pie," or "Hey, you"? It makes a difference. Trust us.
See, diction creates tone, and tone is one of the most important aspects up for discussion in literature. So when your teacher asks, what's the tone of this novel? Just ask yourself: what words are being used?