Diode/Capacitor installation
 

New to the electric scene and I was wondering what the purpose of the diode is. I have two NOVAK RACER's and two GTX's... They both came with the diode installed, and the other day I was out running around and the negative wire where the diode is connected started smoking. Running 3S lipo, not smart!!! Does the diode protect the esc from damage, or is the esc pretty much toast?

Also, is it necessary to install capacitors on the brushed motors and what do they do? Sorry for all of the retarded questions, but I would like to learn more about this. ANy help would be appreciated. Thanks!