The vertex shader does all of the work in this example. The diffuse reflection is computed in camera coordinates by first transforming the normal vector using the normal matrix, normalizing, and storing the result in tnorm. Note that the normalization here may not be necessary if your normal vectors are already normalized and the normal matrix does not do any scaling.
The normal matrix is the inverse transpose of the upper-left 3x3 portion of the model-view matrix. We use the inverse transpose because normal vectors transform differently than the vertex position. For a more thorough discussion of the normal matrix, and the reasons why, see any introductory computer graphics textbook (a good choice would be Computer Graphics ...
