Crystals composed of micrometer size colloidal particles diffract light and are both of fundamental interest as well as having important applications as filters, sensors and photonic devices. Laser light is used to diffract from these crystals in close analogy to x-ray or electron diffraction used for atomic crystals. Laser diffraction microscopy explores optical diffraction contrast to image crystals and crystal defects in analogy to the transmission electron microscopy technique used to image their atomic counterparts. This review discusses the application of optical diffraction contrast imaging to elucidate colloidal crystal nucleation and growth, and defect propagation. Diffraction contrast is described in terms of optical scattering theory and kinematical diffraction contrast theory developed for electron microscopy. Complementary information at the particle scale is obtained with high-resolution confocal microscopy. Confocal image stacks provide insight into the three-dimensional topology of defects and the interplay between applied strain and thermal fluctuations that governs defect nucleation.