Nature photographer Steve Perry goes into great detail, with real life examples, about what lens diffraction is. He answers all of these important questions (among others):

How far can you safely stop down?
Does diffraction limit the usefulness of high res sensors?
Can you sharpen out diffraction?
Should you ever use small F/stops?
What causes diffraction in the first place?
What’s the difference between sharpness and depth of field?

Make sure to check out his website at