Reddit kicked Digg's ass because Reddit is designed as a feedback loop that benefits all users. Digg only rewards elite users.
Look at a random Reddit submission. If it survives the first minute, it makes some user's frontpage. If it is "good," it gets votes and is seen by more people. If the username is popular, it gets upvoted faster. But it turns out this is not necessary for success - I have submitted successful articles without any possible benefit of name recognition, or help from friends.
Reddit's comment section is a great feedback loop: Reddit is designed for discussion, and discussion is great at generating more discussion. Large comment threads form on popular articles, even if they're only lightly inspired by the article or vapid. You must check your recent comments to defend yourself, since the risk is high that someone will strongly and persuasively disagree with you. After all, it's Reddit. Good comments get trophies. Really good comments make /r/bestof.
In contrast, Digg is a feedback loop that benefits the best users. Within a few years of Digg's launch (especially after they dropped the technology-only focus), it was almost impossible to get an article on the frontpage without a friend network, or the blessing of a poweruser. The various sections of Digg were littered with hundreds of high-quality articles with two Diggs. To successfully submit articles to Digg, you needed to focus energy on gaining a network and voting on articles that they submit, and using this network to gain a larger network. The last time I was there, the comments section was also a nightmare. It is designed for single-use comments, and not for discussion. At one point they introduced nested comments, but it seems like they've either done away with it, or don't have enough comments to nest.
The best website designs act as feedback loops. Reddit has polished theirs.