You'll also want to research the upgrades to the envoy cruisers at some point. These appear as techs in the faction's appropriate "Diplomacy" research tree as having the envoy cruiser tech as a prerequisite. In its current state, all of these techs are activatablle abilities that provide the allied or enemy owner of the planet where your envoy is at (note: you can't use the abilites of your envoys on your own planet) with additional benefits. One really great one the TEC has is a 50% increase to the trade income a planet produces by 50%. The Vasari envoy has an ability to improve the resource extractor rate and ship production rate by a lot. Things are still being tweaked, but it's definitely worth it to play around with them.

CoBBQ is right, you'll generally want to try and secure a cease fire before sending the envoys in. While envoys have an activatable invulnerability ability, it only lasts 30 seconds with a cooldown of 120 seconds (good for moving your envoy past dangerous planets, but not for permanently leaving your envoy at a planet who you are at war with). Some exceptions exist though; the Advent can research the "Sacrifice" ability for their envoys, allowing them to sacrifice themselves in exchange for a significant relations boost (this always gets a laugh out of me; rushing in with tons of envoys at a hostile planet in a last-ditch attempt to improve relations so I can get them to stop attacking me; note this only works with the AI, human players aren't controlled by relationships!).

The relationship system in Diplomacy has been changed so that a relationship between two players has two different numbers. The one you normally see when you go to the diplomacy screen is what THEY think about YOU; for the AI, it's how likely they'll agree to ceasefire agreements or other pacts. This number can range from 0 to 20, where 10 is the natural maximum you can reach by completing missions, or destroying the enemy of that faction, etc. To get in the 10 to 20 range, you need these envoy ships!

But, you say, why do I need to get more than 10? It's for the new pacts introduced in Diplomacy, each side has 6 different pacts to offer, which, when active, provides a significant boost to something for both members of the pact. Each faction has unique pacts, so there's a total of 18 unique pacts so far. To offer a pact, you go to the Manage Pacts part of a faction on the relationship screen. There you'll see those two number; the left is what THEY think about YOU and the right is what YOU think about THEM. To get a pact, both those numbers have to meet the requirement of the pact (i.e. you need to send enough envoys to their planets, and they need to send enough envoys to your planet!).

You only need to send one envoy per planet if you're looking to mazimize your relationship gain, as each planet can only provide a maximum of 1.50 relationship. This is obtained and maintained by keeping an envoy ship there, and you only need one to maintain it. There are reasons you may want to send more than one envoy ship to a planet. For example, if a planet is ever bombed and control is lost, then all relationship accrued by your envoy ships is lost! You may lose pacts if your relationship falls down far enough. If the former owner of the planet gets control back, you'll have to get that extra relationship on that planet back up from 0 again (and that takes time!). In this case, you may want to send more than one envoy ship to increase that rate! You may also want to send multiple envoy ships so that your ally can benefit from the abilities! Most envoy abilities have a shorter duration than cooldown, so staggering the use of the ability between ships can keep these awesome bonuses happening for a longer period of time!

As awesome as envoy cruisers are, be warned, they take 12 supply each and don't add much to your military strength. I'm still working out strategies in the early game (and that's only against the AI, I ain't thought about other real human players yet), but Diplomacy's adding a lot to the mix!

The Sins of a Solar Empire backstory for Diplomacy is that there are factions within these races (which explains how more than 3 people can play the game) that are looking to ally with other races to help them win the war. Meh... As sci-fi-y as the backstory is, it really isn't the big draw of this awesome game.

In a 1v1v1 (FFA), yeah, it'll be a crapshoot as to which two team up to beat the third player (though, that's almost always the case in any RTS game ever). However, in larger games against the AI, playing the Diplomacy game may be a good way to get that really tough opponent off your back. In locked games, the envoy / pacts system as well as the envoy ship abilities provide great bonuses for your team; bonuses which going all out down the military path won't yield as well.

I'm not sure what happens when there's only two players left. I do know you win if you have a peace treaty with everyone else. If you don't have that with the AI then he might instantly break the ceasefire agreement and treat you like a hostile. In this case, you probably won't get any pacts going on with them.

Pacts benefit both players who sign them, so losing them is a loss for both you and the other player, which probably isn't that bad.

If you make a pact with a player, and he gets defeated, you'll lose all pacts you have with them (after all, they aren't alive anymore to keep up their side of the deal). I'm not 100% sure but that seems like the logical way things would go.