Diseased is easily distinguished by the swarm of flies that surround the diseased target. It is a debilitating effect that reduces the ability to take and deal damage:
Bovus is diseased
A hero with little life may not be able to restore their health back to full from halved healing effects. And a hero that was once able to deal significant damage with a single ability may not have the ATK to deal enough damage, especially when their CRIT chance is also negated by the disease.
Other enemies with passives like Disease Bane (deals 3x damage towards Diseased targets) capitalize on Diseased effects.
Dark Heroes like Lord Zomm, Life Reaper Brom and Kobal the Pestilent have the ability to inflict disease. In addition, Kobal the Pestilent's Contagion Control increases damage upon being diseased. Heroes and enemies that have the Soulless Scourge or Lifeless passive, respectively, are immune to Disease, and other Dark Heroes are slightly more resistant to Disease.
TIP: For quests like "Apply disease debuff to enemies" Lily Blossom's Sapping Vines and Kelpy Shells' Waterlogged Field count as Diseased debuff.
Heroes
The following heroes have or can inflict/apply Diseased:
Unstable Bomb (Special Attack): Ranged Physical Attack on target enemy that applies up to 3 random status effects. Cooldown of this special attack is reduced for each status effect missed.
Plague Spreader (Trait): Chance to Disease on CRIT. Pandemic Swarm (Special Attack): Ranged Dark attack on all enemies with a chance to Disease. Contagion Control (Special Attack): Ranged Spirit attack on all enemies that lowers their DEF and deals 2x damage to Diseased targets.
Putrid Claw (Basic Attack): A Basic Melee Dark attack with a chance to Disease and spread the Disease. Lord of the Undead (Trait): Self and Undead allies gain +25% Max HP and have a chance to Disease Melee attackers when hit.
Chaos Storm (Special Attack): Ranged Dark attack on all enemies with a chance to Freeze, Burn, Disease, Wound, or Paralyze. Necro Bolt (Basic Attack): A Basic Ranged Dark attack with a chance to Disease.
Tinkerer's Tricks (Trait): All attacks have a chance to apply one of the following debuffs to each enemy hit: Chilled, Burned, Shocked, Diseased, or Poisoned. Only one of these debuffs will be applied per hit, and is applied to each enemy individually. This means that if you use Helmet Missiles, one enemy could get burned, another could be poisoned, and another might not be debuffed at all (resisted or immune).
Fog of War (Special Attack): Ranged Dark attack on all enemies that Diseases on hit, and self and allies receive -50% damage from Epic attacks for 3 turns.
Potent Plague (Trait): Spreads Diseased on all enemies, regardless of resistance or immunities at the start of battle, and the first time Pontifex Mortis dies in battle (it will not activate if he is resurrected and dies again).
Dryad Ice (Trait): Starts dungeons in Ice Block, reducing damage taken (90% Damage Reduction) and Debuff immune until their first turn. Can't be stolen, copied, or purged.
Ambush Tactics (Special Attack): Ranged Physical attack on target enemy and all Ranged allies attack the same target, then gain Stealth and become Invulnerable for 1 turn. Starts Powered.
Ice Block (Trait): Starts dungeons in Ice Block, reducing damage taken (90% Damage Reduction) and Debuff immune until his first turn. Can't be stolen, copied, or purged.
The Last Word (Trait): Slow allies and self take 30% reduced damage from Fast enemies. Slow allies revenge attacks twice. Slow allies can't have buffs removed or debuffs added by fast enemies.