The difference is the frets. Our modern western note system we divide the octave evenly into 12 notes, but more ancient (and scientifically correct actually) note systems are based only on the notes you would use in a single piece of music/scale, and these instruments aren't just missing the unused frets (if they have frets) the distance between notes is different.
Diatonic means "as per the scale" (sorta), and the intonation system (distance between notes) is called Just Intonation, rather than our modern 12TET. Inbetween the 2 systems is what used to be used in Europe (and what most classical music was written for) which are the "tempered intonations" which do divide the octave into 12 notes, but they are not evenly space - so you get a bit of both worlds.
The advantage of Just Intonation is that every note is much much more "in-tune" with the root note (but not necessarily with each other) than in our modern 12TET, but it is not as versatile, and notes can't be stacked as much (because in a big chord the notes might all be perfect with the root note, but not play nice with each other).
In 12TET the advantage is that you can change scales or keys mid song, and that every key sounds exactly the same, just higher or lower. Also, because all the notes (other than the octaves) are slightly out of tune with the root note (in some cases much more than slightly) they play nicer with each other. So we can stack melodies and chords until the cows come home.
In a tempered intonation you can still stack stuff like in 12TET, but you get different results. In 12TET a minor chord is exactly the same, regardless of it's root, but in a tempered system some minor chords are more in or out of tune than others, and in different ways (same with scales. The minor scale might sound more "sad" in the key of F, then more angry in D, etc).
It's remarkable the possibilities that exist. I'd be happy to elaborate on the science behind why in some ways Just Intonation is "more correct" (Indian music uses Just Intonation) but depending on what your desired result is, 12TET, or a tempered 12 note system might work better (There's more than just 12TET too. In 12TET the 5ths and 4ths are nearly perfect, but the Major and Minor 3rds are very out of tune (especially major to my ear). But in a different one, maybe 33TET (I made that up) maybe the 4ths and 5ths are horrible, but the 3rds are excellent).
ANYWAYS - does yours have frets like a guitar, or are there some places where the spaces between frets are much bigger or smaller than on a guitar? Mountain Dulcimers are typically diatonic as I understand it.
