Before marriage, she was Lady Diana Spencer. She was a Lady as her father was an earl. Upon marriage to Charles, she became HRH (Her Royal Highness) The Princess of Wales. When they divorced, she stopped being THE Princess of Wales and was styled Diana, Princess of Wales. It sounds a little complicated and strange but divorced wives of titled men may still style themselves as they did in marriage, although they no longer hold the actual title. Same thing applies to Sarah, Duchess of York. Before marriage she was simply Miss Sarah Ferguson, married the Duke of York so therefore became the Duchess of York. As long as she remains unmarried she may style herself as Sarah, Duchess of York. If she marries, for example, Mr Smith, she would become Mrs Smith and lose her previous style. Same applied to Diana during the period post-divorce until she died.
The Queen didn't strip Diana of any title as such. The Queen issued a Letters Patent (formal announcement in other words) affirming that divorced wives of royals lose the style Royal Highness, ie she was no longer an HRH.
She was never actually called "Princess Diana". Only princesses in their own right ie born a princess instead of marrying a prince (eg Princess Beatrice, Princess Eugenie etc) can be styled as Princess Firstname.
Prince Charles's current wife - Camilla - is legally the Princess of Wales but uses the feminine equivalent of Charles's subsidiary title: Duke (therefore she's the Duchess) of Cornwall. This is due to we sensitivies surrounding Diana and how she was synonymous as Princess of Wales.