When you "stop" down, you're physically blocking (or stopping) light from the edges of the lens from hitting the image. This light often focuses at a slightly different distance to light that passes right through the centre of the lens which causes a loss of sharpness known as spherical aberration. There are other aberrations which affect sharpness, these too diminish when stopping down the lens.
Other than diffraction there's nothing that affects resolution per se (apart from possibly noise) but in can affect image quality in general. Stopping down can affect Bokeh, points of light rendered as circles wide open can become hexagons, octogons, etc. depending on how many aperture blades you have. Dust on the sensor will much more apparent (due to the light passing straight through the centre of the lens casting a more defined shadow on the sensor), and finally you will have less light which can result in increased noise in the image if you don't compensate with a slower shutter speed (which can in turn result in blur from camera/subject motion).
Stopping down can also create a starburst effect around light sources, although this is often seen as an improvement.