What is Multipath distortion ?
As a radio frequency (RF) signal is transmitted and encounters obstacles on its way, it is partially reflected, refracted, etc. This causes the signal to split and take multiple paths towards the receiver, each path experiencing different delay and some arriving out of "phase". This "multipath" behavior generally reduces quality and introduces distortion to the signal.
One way to reduce the effect of multipath scattering is to use dual diversity antennas. Many wireless access points and routers (802.11 b/g) use dual antennas to reduce the effects of this multipath distortion.
Open environments without many obstacles to the wireless signal generally do not experience multipath distortion.
Note that some newer routers (802.11n, 802.11ac) also use multiple antennas for different wireless streams, beamforming, and other newer singal modulation techniques to increase signal strength and throughput, rather than signal diversity alone.
Generally, diversity is a method to minimize the effect of multipath distortion. Diversity antennas should be of the same type and gain, placed close enough to each other so that the RF coverage area is nearly identical.
See also: Cisco - Multipath and Diversity