Maintenance for the week of April 15:
• [COMPLETE] ESO Store and Account System for maintenance – April 16, 8:00AM EDT (12:00 UTC) - 6:00PM EDT (22:00 UTC)
Diminishing returns simply means that the more you have of something the less effective it becomes.
Let's make an example.
let's say you have two people, one with 100% crit damage, the other with 50% crit damage. If you add 10 % to each of them, the person who went from 50 to 60 will see a bigger increase in damage compared to the one who went from 100 to 110.
This is basically what diminishing returns are, and why it's usually not worth it to stack into a single stat.
At the end of the day, diminishing returns are simply mathematics, the only thing they can do to have a completely linear power progression for each stat is if 1 point of each stats become progressively more and more powerful to keep up with the diminishing returns, but nobody is gonna do that.
JinMori explained it perfectly and another example is the diminishing returns in the champion point system. Each point you slot becomes less effective than the last, and I think mathematically 32 points is the sweet spot for many of the champion upgrades. Of course that's not true for every single one as some scale higher than others, for example the following...
Elemental Expert:
Increases your Flame, Frost, Shock, and Magic Damage by [0-15]%.
Master-at-Arms
Increases the damage of your direct damage attacks by [0-25]%.
Its more profitable to slot points into Master at Arms than Elemental Expert unless you find yourself not using direct damage attacks as much. Of course most of the attacks in this game are direct damage and I kinda of wish ESO made it apparent what skills are effected by what.