Diploma mill is a frank and pejorative term for the many bogus "schools", "colleges" and "universities" — run by charlatans for naive boobs — that confer fictional "degrees" that are not recognized by any other educational institutions or bodies. Large numbers of gullible fools sign up for these — often seriously expensive — programs.
Large numbers of charlatans also sign up in order to expand their qualifications. A good number of creation "scientists", most notably Kent Hovind and Carl Baugh, have used diploma mill degrees as fraudulent cudgels to intimidate would-be debate opponents with their "credentials".
Diploma mills damage the reputation of distance education, and indeed qualifications in general, for everyone who isn't a fraud.
 Contrast with real degrees
Many people receive advertisements for "colleges" offering the opportunity to earn college degrees (usually for personal advancement) with little or no work. These degrees, of course, typically do not represent a substantial learning opportunity and do not give the "students" the knowledge and skills represented by a traditional degree.
What gives a real qualification or degree its power is the fact that it is recognised by other institutions or authorities worldwide. Anyone can sign a piece of paper saying that they have a qualification in "being a badass", but if the "Departments of Badass" at "Badass Universities" all over the world don't recognise that piece of paper as meaning something, it means precisely nothing. "Real" educational institutions that are recognised as being able to give degrees and qualifications are accredited; meaning that their curriculum and standards have been examined and approved by an appropriate board of experts and we can be reasonably sure that the person holding the piece of paper can do exactly what that piece of paper says they can.
 Contrast with real correspondence schools
There are many accredited institutions that teach degree courses by correspondence. A degree from the Open University is highly respected by UK employers, as it not only shows qualifications in a field but that you are the sort of person who can start a years-long process and successfully finish it while working a day job. The University of New England does similar courses in Australia. (The University of Phoenix has a somewhat worse reputation, but is still presently accredited.)
Just like a degree where you show up for class, these are real degrees that involve hard work over a number of years. You may be a paying customer, but you have to actually pass your course for real.
 Non-accredited courses and fraud
In the US the Secretary of Education maintains a list of recognized accreditation agencies whose decisions are accepted as legitimate — and the governments and universities of other countries may also recognize them. However, it is easy for a school to operate without accreditation and almost entirely without oversight and regulation, thus, their degrees and qualifications are essentially meaningless. There are also a number of agencies who offer "accreditation" to such schools, but as these are unrecognized by the government and other global bodies, their accreditations are almost worthless.
Unfortunately, this can constitute fraud at several levels. Compare to the case of people can buying or selling a "novelty" fake ID - it's not illegal to own a fake ID, it is illegal to use it. Using degrees and qualifications obtained from unaccredited institutions is similar - if someone tries to pass off the PhD they got for $800 from the Internet as something that actually took them three years working in a lab, resulting in a 50,000 word thesis that they defended every single word of, they're in trouble.
 Using fraudulent credentials
The schools are offering fraudulent credentials by misrepresenting the value of the "degrees" awarded, but at the same time, many of the students are also fully aware of the negligible value of their credentials. Nevertheless they use them to misrepresent their knowledge and skills to employers, licensing boards, clients, customers, and students. If you see someone being interviewed on TV about the miracles of nutrition or homeopathy or espousing the wonders of the global flood, and they have "Dr" or "PhD" in their title, it's likely that these credentials came from a diploma mill. Often, they'll make a big show of their titles in order to intimidate people into thinking they're right.
For some reason, people with real, i.e., fully accredited, qualifications don't tend to display them too frequently or prominently. Ben Goldacre often doesn't flaunt the "Dr" to which he's entitled, Richard Dawkins is hardly ever listed as "Prof" except in very formal circumstances. Actual experts tend to care more about their field itself than about credentialism and will generally at least listen to arguments from those without a qualification, in case they have something interesting and apposite to say. Dunning-Kruger effect comes into play on this one: those who are ignorant are extremely proud of their phony doctoral credential, whereas those who are knowledgeable are far more humble about it.
 Recognising fraud
While it is extremely easy to get away with essentially faking a credential, it can become a legal issue if that person is in the public eye. The public are deemed to have certain expectations of someone holding the title of "Dr" or "PhD"; someone using these titles without accredited substantiation can be forced to stop doing so. Such a thing happened to Gillian McKeith when the UK Advertising Standards Agency told her to stop using the titles on her books and TV shows following a complaint by several readers and forum members of Ben Goldacre's Bad Science blog.
In the United Kingdom, it is also illegal to run a diploma mill - that is, it is illegal to offer qualifications that purport to be or may be easily confused with a degree from a legitimate British university unless you are on the list of approved awarding bodies maintained by the government. Similar laws exist in Malaysia, India, Germany and other countries.
Some countries like South Korea make it a crime to claim to have a degree if it is from an unaccredited university. New Zealand law makes it illegal to use the terms "degree" or "university" in reference to unaccredited qualifications.
 Legitimate reasons for being unaccredited
It is not always the case that unaccredited schools are diploma mills. There are a few legitimate reasons for a school to be unaccredited. For example, the accreditation process takes time and a new school may not have completed the process. The state of California has an official two-tiered system of education where the Bureau for Private Post-secondary and Vocational Education (BPPVE) supervises and establishes standards for otherwise unaccredited schools.
Some states consider it perfectly legitimate for religious schools to be unaccredited. This makes some sense with seminaries for obscure religions, where there is not yet a large-scale consensus on what is required for ordination, but is also (unfortunately) an easy route for those who want to peddle pseudoscience.
 Illegitimate reasons for being unaccredited
Some diploma mills attempt to shield themselves using conspiracy theories, claiming that the accreditation system is a cudgel designed to force schools to teach "accepted" topics and run like the plague from "controversial" topics lest the degrees they issue be rendered mud by the Evil Liberal Science Conspiracy. Erm... yeah.
 Famous diploma mills
 Famous holders of mill diplomas
- David Duke - Thesis topic: "Zionism as a Form of Ethnic Supremacism".
- Kent Hovind - Read the dissertation!
- Gillian McKeith - Used her title when working as a television nutritionist, until she was forced to stop by the Advertising Standards Authority.
- Orly Taitz - not the title "doctor" (she is a dentist), but her mail-order unaccredited law degree.
- Hunter S. Thompson - Bought a Doctorate of Divinity by mail order from the Universal Life Church, and referred to himself as "Dr. Thompson" and a "doctor of journalism" thereafter.