'Git Diff' Doesn't Give Any Output

If I run git diff I would expect to see a list of changes of my working directory relative to whatever had been committed before (or a list of the working directory contents if it's a new repository with no commits). Try this example:

$ mkdir temp
$ cd temp
$ git init
$ echo "first line" > test.txt
$ git status
# On branch master
# Untracked files:
#   (use "git add <file>..." to include in what will be committed)
#
#       test.txt
nothing added to commit but untracked files present (use "git add" to track)

Let's see a diff of test.txt:

$ git diff

This doesn't give any output!

I would expect to see a diff like + first line, but instead I get nothing. It doesn't tell me what's going on. People on Stack Overflow tell me to git add some files so I do:

$ git add .
$ git diff

Still nothing!

Git GUI shows the changes.

git status -v shows the changes.

But for some reason git diff doesn't show anything.

So my questions are:

1. How, in plain English, does git diff work?
2. How can I show a diff of all the changes I've made (unstaged and staged)?

Some people at my company are using Git, but the SVN crowd are going to point at this as a case of where Git is too confusing to be usable.