Basically, diapause is a rest period to survive inhospitable climate until the more favourable weather returns. Insects do it, as well as some chameleon and turtle eggs. Since you're talking chameleons, you're referring to embryonic diapause.
You'll get a good insight by reading this article by Robin Andrews, Professor of Biology Virginia Tech.
The actual article is PDF file you can download from
http://www.biol.vt.edu/faculty/andrews/Chapter4.pdf
Though the article deals with embryonic development in reptiles in general, there's a good explanation and account of diapause part way down page 91.
The whole article is interesting if you're into breeding reptiles.