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When terrorist groups are in the midst of a coup to over throw the government or civil war is afoot, money for supplies, weaponry, transport, bribes and such is needed.
Africa, being wealthy in diamonds (Zimbabwe, Libya, both the Democratic Republic and the Republic of the Congo, etc.), will mine this precious stone and sell them in the world wide diamond trade.
Miners, unwilling to work for free (and terrorists not wanting to spend money on wages) are forced to mine these diamonds in terrible conditions. These workers are treated terribly (think of them more as slaves), and may often be injured to encourage continued work (in other words, it's better than being dead!). This is what makes the diamond a 'blood' diamond. The worthiness of a diamond has caused a person's blood to be spilled, either by killing a slow worker/thief, starving them or harming them. The money gained from such diamond is then also used to fund a force for war (more blood).
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