colordiff is a wrapper for diff and produces the same output as diff but with coloured syntax highlighting at the command line to improve readability. The output is similar to how a diff-generated patch might appear in Vim or Emacs with the appropriate syntax highlighting options enabled. The colour schemes can be read from a central configuration file or from a local user ~/.colordiffrc file.
colordiff makes use of ANSI colours and as such will only work when ANSI colours can be used – typical examples are xterms and Eterms, as well as console sessions.
colordiff has been tested on various flavours of Linux and under OpenBSD, but should be broadly portable to other systems.
You can call colordiff the same way you call diff: colordiff file1 file2 or you could diff and pipe it down to colordiff.