I’ve extensively used Beyond Compare, a powerful file and directory comparison software from Scooter Software.

This is an invaluable tool for software developers, software configuration engineers etc. The file compare view is very intuitive yet powerful and customizable. You can chose to view only different lines or matching lines, you could set foreground and background colors of your choice to highlight the differences etc. It supports two way merging of changes (both ansi and unicode text). The directory compare view is equally powerful, supporting rules based or binary comparison of file names. Quite large directories can be compared in seconds. Filters can be applied to show only different files, orphan files etc. The interface also supports copying of files between directories, deleting files, changing timestamps and much more. There’s a 30 day trial version and I feel the pricing is quite reasonable.