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Aside from the use of media like the Voice of America, it also includes other kinds of interaction with the public in other countries. Arranging student exchange programs, hosting seminars, and meeting with foreign business and academic leaders are all considered public diplomacy.
The terms public diplomacy and propaganda are closely related. The term public diplomacy clearly originated as a euphemism for propaganda. According to publicdiplomacy.org, a website sponsored by the USIA Alumni Association,
The dictionary definition of the word propaganda is "The systematic propagation of a doctrine or cause or of information reflecting the views and interests of those advocating such a doctrine or cause." Notice that the definition says nothing about whether the material is or is not true; the essence of propaganda is that it is distributed with the intention of supporting a cause. The word literally means "that which ought to be propagated" and originated in the Catholic Church to describe the church agency responsible for evangelising. See the article on propaganda for more detail.
In the United States, however, the word "propaganda" carried and carries the connotation of falsehood. The USIA has always maintained that its agencies, such as the Voice of America, are truthful. In a famous remark, Edward R. Murrow, then director of the USIA, said:
Broadly speaking, then, public diplomacy can mean truthful propaganda.
Propaganda Diplomacy