Basically, I you flick the c-stick in one of the 8 cardinal directions directions during a hit(aka hitlag) your charcter will move a little in that direction before knockback. A nice example is smash the c-stick and the control stick up continuosly during Pika's downsmash. You slowly get knocked out of it from the top. Which is an example of SDI SDI is important for escaping multi hit attacks such as Fox's Uari, Snake's ftilt, Pika's Dsmash, etc. Also it helps you tech some hits easiley like Falco's chaingrab to Dair spike.
Here is a good instructional video on the multiple types of di and many of their applications.