Answer:
They find different enterprises to incorporate into their farming practices. For instance, producers who have a cow-calf operation could diversify their operation by retaining ownership of the calves they could've otherwise sold at weaning time, and instead keep them to background them on pasture or hay and feed for a few months until they can sell them directly to a local feedlot.
Another example is if a grain farmer wishes to plant peas and canola along with the wheat he plants every year. That's diversifying.