Diminishing Marginal Utility of Wealth means the more wealth you have, the less happy each incremental dollar makes you. A dollar means a lot more to someone in third world, than it does to Bill Gates. I say this as a challenge to what I say regularly on this blog. Sure people are richer they than used to be, but does that mean they are happier? The general consensus seems to be that once humans get above the minimum wealth needed to support life, then the happiness brought about by each dollar gets smaller and smaller.
One possible explanation for why is happy amnesia. We forget how bad we used to have it. It could also be because happiness comes from relative comparisons of wealth. A keeping up with the Joneses mentality. A final reason could be the wealth/time constraint I've talked about before. That said, though they are diminishing, the benefits are not zero. There is still a strong correlation between measured happiness and wealth. We should continue pursue human progress, but not idolize it.
Update: The diminishing marginal utility of wealth begins at $40,000.