Watch the Dominant Blues Progression online guitar lesson by John Stowell from Modern Jazz Progressions
The diminished chord as an altered dominant chord occurs twice in this progression, as B diminished (G7flat9) resolving to C minor, and as F sharp diminished (D7 flat9) to G minor.
If a diminished chord appears in a progression a half step below a chord, it can be interpreted as a V of the chord which follows it.
Being able to access small variations in a progression and focus on harmonic detail will help you to create variety in your solos.
Having a number of options is useful, especially when taking multiple choruses on a short song form like the blues.