As things stand currently, according to Drysc, "What diminishing returns mean for honor is that each subsequent kill of the same target will reward you with less and less honor; 10% less per kill to be exact. One of the major downsides to diminishing returns is that the calculations, for potentially hundreds of thousands of players, is too intense to do real time, so they are calculated during off-peak hours. This in turn requires that the honor you gain be temporarily displayed as "estimated" until the calculations are run. It's a system that we've certainly improved (moving the calculation from weekly to daily) but still always disliked. It creates a very uninteresting and sometimes aggravating or confusing detachment from your achievements and the actual reward."
I can't say I disagree with him on that score, I hate waiting till the next day rolls around. It's interesting to me to see that Blizzard always disliked it, too, as I would not have guessed that to be the case.
Drysc goes on to further point out that the original reason for DR on honor was to prevent exploitation of the system that is no longer a real problem, what with battlegrounds providing a more reasonable reward for effort as far as honor is concerned compared to trying to exploit by corpse camping or otherwise killing the same mob over and over. The new system still only allows you to kill a single target so often, though: after 50 deaths, a player in a BG is worth no more honor until that BG is over. Better still, with the new system, honor gain will be instant. No more waiting for tomorrow, you get your honor as soon as you make a kill and can spend it as soon as you're done.
Thanks to World of Raids and our tipsters for the heads up.