Now, in the previous lesson, we learned that both V chords and vii chords can function as Dominant chords, but when using diminished chords, these can be put in the place of a V chord and that diminished chord can resolve up a half step to the root of the chord that is being resolved to. Think of it as a "diminished-secondary dominant".
Here is an example of this type of thing within the C major scale as a reference to how this will work:
The cool thing, is that when you use diminished chords in place of a secondary dominant chord, you get sort of a chromatic walking bass line effect to the next chord. You can also mix and match secondary dominants and diminished chords within the same progression, so here is an example of how that would look:
In the next lesson, we will be going over the Tri-Tone substitution and it's applications.