Quick tip, you can use any expression for the sed commands in the (). With this trick you can redirect the stdout of 2 commands to the diff command. This might become very useful, if you want to compare 2 files, excluding the first line.
diff <(sed '1d' file) <(sed '1d' file2)
More interesting example is where the string ABC is converted to abc before comparing in the second file with the following command:
diff file <(sed 's/ABC/abc/g' file2)