The heat shimmer is a similar effect to what you see on hot days over roads. I think graham's explanation is essentially the gist of it, though I think he means "refracted" rather than diffracted.
Light travels in straight lines in general but can be bent in an effect called "refraction" that occurs whenever a beam of light passes from one material to another. You can think of hot and cold air as different materials, so as light travels between regions of hotter and colder air it refracts. Because meanwhile the air is flowing (hot air rises and in so doing pushes the colder air out of the way) that means there's a lot of boundaries between the cold and the hot air for the light to refract through. That leads to the shimmering effect because of the complicated light paths and the ever-changing position of the hot and cold air.