How do I know if I should choose a diffused or focal lens?

Choosing the correct optic ultimately it comes down to the application use from a functional perspective. 

A diffused lens is designed to diffuse light, with the view of having a wide lighting area coverage. The trade off of this optic type is that glare is often higher than focal based optics. 

Focal base lenses are as they sound - they are for directional lighting where a specific beam angle is required. Focal lenses are often used in architectural projects, as they provide a close imitation of traditional halogen-based lighting and can be quite aesthetically pleasing.