To cheat or swindle someone out of something. He was caught trying to diddle the company out of thousands of dollars.
Stop diddling around and get to work.
To manipulate or fiddle with something in a way that is not serious or productive. He diddled with the radio until he found a station he liked.
To engage in sexual activity with or to masturbate (slang, chiefly informal). She caught him diddling himself in the bathroom.