A hydraulic diverter valve redirects hydraulic fluid flow from one circuit to another. According to the provided reference from a Tractor Mike YouTube video, it changes the flow around to a second circuit. For example, if you have a tree shear or a grapple attachment on a tractor, the diverter valve sends the flow of oil to the cylinders on the tree shear or grapple to power them.
In essence, it's a switch for hydraulic fluid. Instead of needing multiple hydraulic circuits for different attachments, a diverter valve allows you to use one circuit to power multiple functions by selectively diverting the fluid where it's needed.
