As per the manual, I think the main difference is what you and enemy faction starts off with. Number of ships, planets, and maybe the loyalty of said planets seem to be affected. It's really not a big difference. If you can win comfortably on normal, hard mode won't be much of a challenge.

Basicly the AI is exsactly the same on all difficulties.
However they are programmed to turn aggressive after a certain level of infrastructure is achieved, meaning they become more proactive with diplomacy, and start grouping their ships to attack sooner on higher difficulties, because they start with more planets/infrastructure, whereas the player starts with less.

k ty