In TTL (through-the-lens) mode, cameras can determine the amount of light needed for correct exposure. However, this not usually the case. Sometimes you want to adjust the amount of light so you use flash compansation to make the necessary adjustments. Whether to use more or less power depends on you. It may be akin to going into manual over ride when in auto mode. Note this is different when in manual mode when power is at 100% unless you further "manually" adjust the stops to your desired effect. Though both do try to attempt the same (meaning getting the right exposure). Below is a link about flash compensation explained in lay man's terms.
How to use flash compensation | Photo Answers
Bounce flash is a nice technique to avoid "blowouts" of the subject. You can also try bouncing on walls so additional lighting can also come from left or right. Your SB-700 can tilt and swivel. So try to experiment using the walls and ceilings and with different angles. The main limit of bounce flash obviously is when you are outdoors since there is no ceiling or wall to bounce to. Main solution to this is to use a bounce card. If I am not mistaken the SB-700 has a built-in bounce card. (It is the "thingy" in the flash head in case you don't know.)
Using direct flash and bounce flash IMO depends on really how you want create your shot. In my experience, if I use direct flash my subjects are bright or blown out while the background is dark even when indoors. I have two solutions for this. I use direct flash with slow sync on to get a brighter background. But this you probably know may lead to blurred shots as slower shutter speeds are used. Alternatively, I use bounce flash to get better lighting. Best way to do this is to keep on practicing.
Diffusers soften the light of the flash to have a subtle change in the subject. You can dispense using a diffuser by using flash compensation, but IMO there are subtle differences in the shot. In my case, since I don't have a bounce card I use a diffuser when doing fill flash outoodrs. When to use it is a matter of personal preference IMO. Again practice is the key. And I believe the SB-700 comes with a diffuser box. Below is a link about diffusers.
Using Flash Diffusers and Reflectors