Diffractive optical elements use a diffraction grating that alters the path of light rays. Diffraction is encountered in ordinary lenses when a small aperture is used. Light rays passing through this aperture are bent very slightly, so that they are no longer travelling in a straight line. This affects the focusing and reduces the resolution of the lens. This diffraction is the reason most lenses give their best performance at an aperture about two stops below maximum, rather than at the smallest apertures.
However, a diffraction grating can be used to introduce corrections rather than create aberrations. Diffraction gratings look a bit like miniature versions of the fresnel lenses used in a lighthouse. They are widely used in spectroscopes and in the optical signal-reading systems of CD and DVD players.
Until 2000, diffractive elements had not been used in camera lenses because there is a tendency for white light to produce superfluous diffracted light as it passes through the grating. This results in flare, which degrades the image quality.
Canon resolved this problem by creating a multi-layer construction made from two single-layer diffractive optical elements with opposing concentric circular diffraction gratings. When incident light enters the element, superfluous diffracted light is not produced and almost all of the light is used for the image. This makes it possible to use a diffractive optical element in a camera lens.