battling him
To battle him, you just have to use the item 'Magic Lamp' from your inventory. I would suggest saving first, because it is most likely that -especially if fighting him early on- you will have to try several times.
HP: 8000+
Draw: Demi
Weaknesses: Wind
If you have any Aero spells available, they will be mighty useful in this battle. If you decide to fight him later, use Pandemona.
Diablos levels up as Squall does, so postponing the battle will just make Diablos a stronger opponent and then you will have a low-leveled Diablos as a GF. So fight him early on.
My strategy usually is to have some characters draw-stock demi and some use Guardian Forces. If you can draw-cast demi on Diablos early in the battle, it will greatly reduce his HP. And he will automatically cast Curaga on the character that 'demi-ed' him. If the characters have low HP, use Limit Breaks (Selphie using several demis at once is nice). But I would not risk it. You most likely only have a couple of Phoenix Downs and no Life magic, so I would suggest keeping their HPs up and attack with Demi and GFs.
Diablos has this clawing attack of sorts, which is pretty powerful for a character in critical status anyway. He also uses Demi which affects the whole party and Gravija, a fortified demi that can kill you, that affects the whole party again.