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Unicorn HAT HD crams 256 RGB LEDs, in a 16x16 = 256 LED matrix, onto a single HAT. High-definition rainbow goodness!
You can still use it for all of the same things as the regular Unicorn HAT, but with four times as many pixels it makes much more complex animations possible, including scrolling text, and even low resolution videos.
The bundled ninja diffuser makes the pixels look extra shiny by providing some subtle diffusion, blurring the lines between each pixel. Simply use four of the nuts to space the diffuser slightly away from the HAT, and the other four to secure it.
The ARM chip on Unicorn HAT HD does all of the heavy lifting, meaning that you can just bung data to it, and it'll take care of the rest. It acts as the agent between your Pi and the three STP16CPC26 LED drivers that actually drive the LEDs.