If I need to take a diameter down a known amount (i.e. 1.000" down to 0.750"), I could zero out "X" on a tool scrape, then advance to -0.250" in Diameter or -0.125" in Radius. Or punch in 0.250" in Diameter mode and take it down to zero.
I hope I'm describing my set up correctly?!?! According to my DRO manual I'm in Diameter mode but really can't tell you for sure. All I know is my DRO reads the diameter of the work so I'm assuming I'm in Diameter mode.
I got so used to using the cross feed dials on the lathe over the years that frankly I'm hit or miss turning on the DRO for diameter work. However, I use it ALL of the time for "Z" work. Really nice to face off the work, zero out the "Z" (or set a "Z" dimension) and know exactly where you're at on the longitudinal position.
Bruce