Diegetic sound is any sound that the character or characters on screen can hear.

Non-diegetic sound is any sound that the audience can hear but the characters on screen cannot.

Examples of diegetic sound in Shaun of the dead

Sound of the news on the TV

Dialogue

Impact of items being thrown

Zombie noises

Examples of non-diegetic sound in Shaun of the dead

Cartoonish whoosh

Music