Diminished chords can certainly have a spooky and nefarious sound, but they also have a lot of functionality. So much functionality, in fact, that besides simply being a diminished chord it can also function as one of four different dominant chords. That’s right, those diminished chords you thought you knew so well have in all likelihood been masquerading as dominant chords in disguise. Want to know how they do it?
OK, first let's talk about guide tones.
Every 7th chord (major, minor, dominant, etc.) has a pair of guide tones. The guide tones refer to the 3rd and 7th of a chord. Notice that the guide tones of the three different chords below are unique to each chord, while the root and 5th are the same in each chord.
Notice also that the guide tones for the dominant chord are a tritone interval (augmented 4th or diminished 5th) apart. That relationship of the 3rd and 7th being a tritone away from one another is unique to dominant 7th chords. The fact that the root and 5th are unchanged among these three chords is good evidence of how important the 3rd and 7th are to the distinction if each chord (because they are the variables) and often why we (as piano players) often substitute other tones for the root and 5th in our chord voicings (such as the 9th and 13th, respectively).
OK, now let's talk about resolution.
The tritone interval present in dominant chords between the 3rd and 7th is what gives dominant chords the feeling of being unstable, wanting to move or resolve to some other chord (generally its "I" chord). Notice how the C7 chord wants to resolve to its "I" chord, F major. This "V to I" resolution is the strongest and most common in all of music.
Notice that the "Bb" pulls down by half-step to resolve to the "A," and the "E" pulls up by half-step to resolve to the "F." Two things are going on to make this resolution quite strong: First, the movement is by half-step, which is the smallest and strongest motion when moving from one chord to another chord. Second, the movement between chords is by what is referred to as contrary motion, meaning that the notes which are resolving are doing so in opposite directions.
What's the takeaway from all of this information? The presence of tritone intervals in a chord is a big clue to the possibility that the chord has dominant function, even if it doesn't look like a dominant chord at first (because we're about to learn how diminished chords can have dominant functions). When you see a tritone interval in a chord, you should consider that the chord could be functioning as a dominant chord.
Read more in PART 2 of this article to see how one diminished chord has the power of FOUR DIMINISHED CHORDS!