Diminishing Returns means that for every additional rating point of Dodge you can less Avoidance for that point. So the Dodge Rating to Avoidance ratio starts at 39ish to 1, but over time will be 40ish to 1, then 41ish to 1, and so on. Armor has actually always been affected by Diminishing Returns too. For every point of armor you get, it makes each extra point less value than the previous one.

It does not change over the course of a fight. It is a static value. The difference is that now Avoidance doesn’t scale linearly, but instead tapers off at the top. This way they won’t have to create another Sunwell Radiance buff in the highest level content.

Crit immunity as many have said is outside that. You still only need 5.6% reduction which this time around translates to 540 Defense for raid bosses, 535 for Heroic Bosses.

But I guess if this were correct, tanking would become a rather unpredictable thing, what I think blizzard doesn’t want.

Sitting at 535 defense I don’t take any crits in Heroics, which I would if DR was implemented.

Diminishing returns normally refers to requiring a higher rating for the same effect at different character levels.