Run diff command to compare all files in directory
You've missed the -r (recursive) option to diff:
diff -r folder1 folder2
For a concise output also add the -q flag; it will only output that the files differ, but doesn't output the actual differences. See the manpage (man 1 diff) for more information and options.
If you have a lot of files and subfolders, you'll probably want to use meld (apt-get install meld), which is a visual diff and merge tool.