Diagonal shear is the traditional theory for carrying shear through a concrete member. It's been observed that shear failures normally occur at a 45 degree plane, hence the diagonal description. This failure plane is useful in designing shear reinforcing, because all the reinforcing that crosses the diagonal parallel to the shear force can be used to resist the shear.
Shear friction only applies at a construction joint. It relies on the roughness of the two adjacent pours providing a surface that has a frictional resistance. The bars connect those two surfaces together. So to fail in friction, the bars must yield. A common error is to try to apply shear friction at other locations than at construction joints. I've seen good structural designers make this mistake. By code, you can't apply shear friction at anyplace other than CJ's although there's a kind of pseudo shear friction at corbels and dapped beams.
For a retaining wall, shear friction would only apply at the wall to slab joint. Right above that, you have diagonal shear.