Diplomacy is a gameplay mechanism used in different situations. Generally it is used to improve or maintain relations with others. It can be used to prevent a war, keep an alliance alive and sometimes you can get interesting rewards in return.
The interface of the diplomacy screen isn't directly obvious.
Making an offer Edit
On the left side, it shows what you have to offer. At the top, it shows the artifacts your knights have to trade. Below that, it shows the unmarried ladies in your court that can be traded. And at the bottom, it shows the gold and food you're offering, starting at 0. To see what the artifacts and ladies are worth, put the pointer over them and more information will be shown at the bottom right.
Opponent preferences Edit
On the right side, you can see which goods the opponent prefers and which goods he isn't interested in. There are four categories:
If a category is transparent, the opponent won't accept any goods in that category. If the category has two green up arrows, it means that category is worth double. A green check indicates the opponent accepts goods in that category.
Choosing an action Edit
The right side also shows the different actions you can take. You have to click the numbered shields underneath the progress bar to change which action you want to select. When you click the numbered shield, the description below will change to show you what the outcome will be.
Selecting an action Edit
As you make your offer, the progress bar fills. When the progress bar reaches a numbered shields, that option becomes available. When you press the select button, the terms are accepted and the diplomacy screen closes.