I very much hope to see more content like this lesson on ProGuitar.

Best wishes,
Tom

The idea behind substituting the G7 by Bdim is this:

We are going from Bbmaj7 --> G7 --> Cm7 --> F7. The B diminished is actually a very common substitution for the G7, and the reason is that the Bdim creates a chromatic bass line from Bb --> Bbdim --> Cm7. The Bdim is actually very similar to the G7, but we get a bit stronger "pull" towards the Cm7. The Bdim (or Bdim7 rather) is the same as playing a G7(b9). That b9 note (Ab) in the Bdim7 chord creates even more tension than a regular G7 chord would do, so it sounds great to substitute G7 with the Bbdim (or Bdim7).

In the next chords after that, Eric is using the C#dim to get to the Dm7. This is the exact same idea. The Dm7 is a substitution for Bbmaj7, and we could actually think of the C#dim (which is a half step below the next chord: Dm7) as a A7(b9) chord, just like we would think of the Bdim7 as a G7(b9) chord.

Whenever you have a V7 to I situation, in other words, a dominant 7 chord that leads "home" (a forth up, or a fifth down - which is the same thing) you can play a diminished chord from the 3rd of the dominant chord. For example, G7 --> Cm7.. Play Bdim7 --> Cm7 or Cmaj7.. This will create more tension over the dominant chord. Doesn't matter if the I chord is major or minor.

So this case is not a flat five substitution, but later in the example, Eric is using the flat five substitution.

Next part of the progression: is Dm7 --> Db7 --> Cm7 --> B7.
Here, Eric is using the flat five substitution.. so the Db7 is a flat five substitution for G7, and the B7 is a flat five substitution for F7.

Sorry for the SUPER long answer, but I felt I needed to explain it in detail to really get the message across. Let me know if you have any further questions Tom, and have a great day! Thanks for being part of the ProGuitar community!
Kind regards/Emil