Diminishing returns happen when resource (time, effort, money, space) yields less output than it did at an earlier time.
In math jargon, diminishing returns happen when the productivity curve starts to flatten out.
Diminishing returns are essentially the inverse of the Pareto 80/20 Principle. Once the 80% of gains are made with 20% of the effort, what are you left with? The final 20% percent of the project will take four times as much effort as the first 80% percent.