Diacritics are those letters that have a small sign added to a letter to alter pronunciation. For example, Mexico is often spelled México, with the special é.
So when you want to tailor your ads to a specific region and what to show them you know what you are 'talking' about, some advertisers use diacritical marks to accent that point.
However, if you use the Google AdWords API's Sandbox, you cannot properly test those ads.
AdWordsAPIAdvisor at a Google Groups thread has confirmed reports that "the Sandbox is rejecting those Cyrillic characters in Campaign names." But this does not mean it does not work on the main Google AdWords server. AdWordsAPIAdvisor said, "if you send the same request to the Production servers it should go through without issue."
This has been a bug in the Sandbox environment for a while and there is currently no estimate time for it to be fixed. AdWordsAPIAdvisor said that it is on the engineers list but it is not as important as fixing bugs in the production environment.
Forum discussion at Google Groups.