Did you have a look at diff-match-patch from google? Apparantly google Docs uses this set of algoritms. It includes not only a diff module, but also a patch module, so you can generate the newest file from older files and diffs.

A python version is included.

http://code.google.com/p/google-diff-match-patch/

import difflib

lines1 = '''
dog
cat
bird
buffalo
gophers
hound
horse
'''.strip().splitlines()

lines2 = '''
cat
dog
bird
buffalo
gopher
horse
mouse
'''.strip().splitlines()

# Changes:
# swapped positions of cat and dog
# changed gophers to gopher
# removed hound
# added mouse

for line in difflib.unified_diff(lines1, lines2, fromfile='file1', tofile='file2', lineterm=''):
    print line

Outputs the following:

--- file1
+++ file2
@@ -1,7 +1,7 @@
+cat
 dog
-cat
 bird
 buffalo
-gophers
-hound
+gopher
 horse
+mouse

This diff gives you context -- surrounding lines to help make it clear how the file is different. You can see "cat" here twice, because it was removed from below "dog" and added above it.

You can use n=0 to remove the context.

for line in difflib.unified_diff(lines1, lines2, fromfile='file1', tofile='file2', lineterm='', n=0):
    print line

Outputting this:

--- file1
+++ file2
@@ -0,0 +1 @@
+cat
@@ -2 +2,0 @@
-cat
@@ -5,2 +5 @@
-gophers
-hound
+gopher
@@ -7,0 +7 @@
+mouse

But now it's full of the "@@" lines telling you the position in the file that has changed. Let's remove the extra lines to make it more readable.

for line in difflib.unified_diff(lines1, lines2, fromfile='file1', tofile='file2', lineterm='', n=0):
    for prefix in ('---', '+++', '@@'):
        if line.startswith(prefix):
            break
    else:
        print line

Giving us this output:

+cat
-cat
-gophers
-hound
+gopher
+mouse

Now what do you want it to do? If you ignore all removed lines, then you won't see that "hound" was removed. If you're happy just showing the additions to the file, then you could do this:

diff = difflib.unified_diff(lines1, lines2, fromfile='file1', tofile='file2', lineterm='', n=0)
lines = list(diff)[2:]
added = [line[1:] for line in lines if line[0] == '+']
removed = [line[1:] for line in lines if line[0] == '-']

print 'additions:'
for line in added:
    print line
print
print 'additions, ignoring position'
for line in added:
    if line not in removed:
        print line

Outputting:

additions:
cat
gopher
mouse

additions, ignoring position:
gopher
mouse

You can probably tell by now that there are various ways to "print the differences" of two files, so you will need to be very specific if you want more help.

You can use ndiff in the difflib module to do this. It has all the information necessary to convert one string into another string.

A simple example:

import difflib

cases=[('afrykanerskojęzyczny', 'afrykanerskojęzycznym'),
       ('afrykanerskojęzyczni', 'nieafrykanerskojęzyczni'),
       ('afrykanerskojęzycznym', 'afrykanerskojęzyczny'),
       ('nieafrykanerskojęzyczni', 'afrykanerskojęzyczni'),
       ('nieafrynerskojęzyczni', 'afrykanerskojzyczni'),
       ('abcdefg','xac')] 

for a,b in cases:     
    print('{} => {}'.format(a,b))  
    for i,s in enumerate(difflib.ndiff(a, b)):
        if s[0]==' ': continue
        elif s[0]=='-':
            print(u'Delete "{}" from position {}'.format(s[-1],i))
        elif s[0]=='+':
            print(u'Add "{}" to position {}'.format(s[-1],i))    
    print()      

prints:

afrykanerskojęzyczny => afrykanerskojęzycznym
Add "m" to position 20

afrykanerskojęzyczni => nieafrykanerskojęzyczni
Add "n" to position 0
Add "i" to position 1
Add "e" to position 2

afrykanerskojęzycznym => afrykanerskojęzyczny
Delete "m" from position 20

nieafrykanerskojęzyczni => afrykanerskojęzyczni
Delete "n" from position 0
Delete "i" from position 1
Delete "e" from position 2

nieafrynerskojęzyczni => afrykanerskojzyczni
Delete "n" from position 0
Delete "i" from position 1
Delete "e" from position 2
Add "k" to position 7
Add "a" to position 8
Delete "ę" from position 16

abcdefg => xac
Add "x" to position 0
Delete "b" from position 2
Delete "d" from position 4
Delete "e" from position 5
Delete "f" from position 6
Delete "g" from position 7