When lines are added or removed in between changed paragraphs the diff algorithm fails to align these correctly to detect the changes at the right places. - In the past this behavior lead to really strange diffs where it seemed that paragraphs were completely rewritten.
Now at least the moved paragraph detection kicks in to make sense out of what's happening, but the diff could still be look much simpler. See the example diff and the comparison below {1].
Before the introduction of paragraph detection:
{F30019363}
After the introduction of paragraph detection:
{F30019368}
Ideally the alignment in the diff would be fixed so the changed paragraphs from the left and the right side are shown next to each other. A simple approach to do that in cases when empty lines following paragraphs are altered produced to many false positives, so I just mention it here: {T184531}
This was originally reported on wiki by Chiswick Chap (as well as the IP who made the edit) at [2].
[1] https://en.wikipedia.org/w/index.php?title=Honeyguide&diff=prev&oldid=779422017
[2] https://en.wikipedia.org/wiki/Wikipedia:Village_pump_(technical)/Archive_155#What.27s_up_with_the_diff_display.3F