How do I diff the outputs of two commands?

Use process substitution:

diff <(cat /etc/passwd) <(cut -f2 /etc/passwd)

<(...) is called process substitution. It converts the output of a command into a file-like object that diff can read from.

While process substitution is not POSIX, it is supported by bash, ksh, and zsh.

Difference between 2 commands output :-

$ diff <(command1) <(command2)

Difference between command output and file :-

$ diff <(command) filename

Difference between 2 files :-

$ diff file1 file2

e.g. $ diff <(mount) <(cat /proc/mounts)