I don't exactly get how it diffuses CO2 into the water... I mean I know that it breaks it up into smaller bubbles, but here's what I don't get:

If we put it under the filter output, even though it blows around the bubbles, they still rise to the top and pop...so how is the CO2 getting diffused?

The reason for glass and wood diffusers is to make the bubbles small as possible so that it can dissolve more easily in the water. Why does it dissolve more easily? If you think about it, CO2 diffusion is when a CO2 bubble breaks up into much smaller bubbles. The smaller and finer the bubbles, the more it'll float around the tank instead of shooting straight up to the surface, and the longer it stays in the tank, the more chances it has to be absorbed by plants.

Glass and wood diffusers help this process go faster by injecting really small/fine bubbles into the tank and therefore increases it's intank diffusion efficiency. It is basically doing the majority of the diffusion that's suppose to take place inside the tank BEFORE it the CO2 even gets inside the tank!

So example:

If you pump CO2 into the tank, it can only diffuse each bubble 5 points. So if you inject a large bubble that is 10 points worth, only 5 will diffuse into the tank since 10-5 = 5. So each bubble that comes out, only half will thoroughly diffuse before hitting the surface and only half of it's potential will be absorbed into your plants. Now if you put in a small bubble that's like a 6, then you get the efficiency of 5 and only lose 1 from each bubble since 6-5=1. So you'll still lose 1 from each of those smaller bubbles, but you'll still get the other 5....and you won't lose as much as the big bubbles.

The numbers are just there to give an example and I'm bad at examples. If you still don't understand, tell me and I'll make up another one.