A diagonal is nothing more than a plane cut diagonally through the hull at various points. You draw diagonals at several locations so that the diagonals are perpendicular to the station lines at various points. You measure along the diagonal to each station line, then draw a curve through the points just like you do a waterline. This curve must be fair. If not you have to move the station line point. That's fairing!
The advantage of the diagonal is that it crosses station line nearly perpendicular, so there is no room for error. Near the stern the diagonals are really important. They can straighten out a real mess.
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