The word "adiabatic" refers to a process where there is no exchange of heat with the surroundings. It means that the system remains isolated, without any heat entering or leaving. Full definition
Dilution varies a lot depending on what quantity is being diluted, and this can get very complicated when a quantity is not conserved for moist adiabatic processes. (hannahlab.org)
It's a small effect, much smaller in the atmosphere than the expansion due to the reduction in pressure as the air rises, but the reduction in volume at a given pressure due to condensation is included in accurate computations of adiabatic lapse rates. (gfdl.noaa.gov)
The Process of Adiabatic Cooling and Heating. (pearltrees.com)