WD Diagnostics is a diagnostics tool for Western Digital Hard Disks having SMART capability. Even if it is made by Western Digital and distributed as a free tool for checking their hardware, it can be used on any hard disk having SMART capability.
Now, SMART (Self-Monitoring, Analysis, and Reporting Technology) is a feature that is present in almost all new hard disks. It is just a collection of parameters that are automatically updated with the status of the hard disk. For example, if there was a write error that caused a bad sector, it will update the information on the smart status. Also there are many such parameters that determine the health of a hard disk. So, we could easily tell whether a hard disk is having too much problems or if it is going to fail, and we could backup our important data before the disaster happens.
SMART monitoring is enabled in most of the motherboards, and the BIOS can check for it and report a failing hard disk. So, this program is actually not necessary, but it can be a good tool to check many hard disks from within windows.