Diabetes can have various effects on the eyes, most commonly the retina.  The walls of the blood vessels tend to become weakened.  Over time, the walls may bulge - known as an aneurysm.  This creates an 'eddy' in the blood flow which can eventually block.  Blood and other fluids also tend to leak from the blood vessels.  

This results in a build up of lipids in the layers of the retina.  Because of the reduction in blood flow, new blood vessels tend to form.  However these blood vessels are fragile and bleed easily.  If the new blood vessels bleed into the jelly in the eye (the vitreous), there can be a sudden loss of vision.  But this may clear somewhat over time.