Plain English Meaning
An oxygen system that gives you oxygen only when you breathe in, and automatically blends it with cabin air. The higher you fly, the more oxygen it adds to each breath. Above a certain altitude, it gives you pure oxygen.
Full Definition
A supplemental oxygen system that delivers oxygen to the user only when they inhale (on demand), and automatically mixes, or dilutes, that oxygen with cabin air in a ratio determined by altitude. As altitude increases, the regulator supplies a higher percentage of oxygen until, at very high altitudes, it delivers 100 percent oxygen.
Context Anchor
Seen in aircraft oxygen system descriptions, crew oxygen mask operation, and maintenance procedures for oxygen regulators and masks.
Derivation
Diluter comes from the Latin diluere, meaning to wash away or — here it means to thin pure oxygen with cabin air. Demand refers to the system only delivering when the user demands it by inhaling, rather than flowing continuously.