//starting with two strings
String String1 = "I eat peaches but only on a Sunday afternoon";
String String2 = "I eat apples but never on a Sunday morning";

for( int i = 0, j = 0; i < String1.length() && j < String2.length(); j++){
   if( String1[ i ] == String2[ j ] ){
      //store character in new string
      i++;
   }else{
      //they don't match so start highlighting as difference
      
   }

}

class StringDiff 
{
    public static void main(String[] args) 
    {
        StringDiff.diff( 
                "the rain in spain falls mainly earth on the plain test",  
                "the rain in spain dog falls mainly on the plain cow"
        );
    }

    public static void diff( String s1, String s2 )
    {
        int i, j;
        String [][] words = new String[2][];
        words[0] = s1.split( "\\s" );
        words[1] = s2.split( "\\s" );

        forloop:for( i = 0, j = 0; i < words[0].length && j < words[1].length; ){
            if( words[0][i].compareTo( words[1][j] ) == 0 ){
                System.out.println( ":" + words[0][i] + ":\t\t:" + words[1][j] + ":" );
                i++; j++;
            }else{
                //search ahead and see if [0][i] can be found in [1]
                int x = j + 1;
                int y;
                while( x < words[ 1 ].length ){
                    if( words[0][i].compareTo( words[1][ x ] ) == 0 ){
                        y = j;
                        j = x;
                        //print all the inserted words
                        for( ; y < x; y++ ){
                            System.out.println( ":new:\t\t:" + words[1][y] + ":" );
                        }
                        continue forloop;
                    }
                    x++;
                }   

                //search ahead and see if [1][j] can be found in [0]
                x = i + 1;
                while( x < words[ 0 ].length ){
                    if( words[0][x].compareTo( words[1][ j ] ) == 0 ){
                        y = i;
                        i = x;
                        for( ; y < x; y++ ){
                            System.out.println( ":" + words[0][y] + ":\t\t:deleted : "  );
                        }
                        continue forloop;
                    }
                    x++;
                }
                break forloop;
            }
        }

        //print excess words
        while( i < words[ 0 ].length ){
                System.out.println( ":" + words[0][i] + ":\t\t:deleted: "  );
                i++;
        }

        while( j < words[ 1 ].length ){
                System.out.println( ":new:\t\t:" + words[1][j] + ":"  );
                j++;
        }

    }
}

:the:           :the:
:rain:          :rain:
:in:            :in:
:spain:         :spain:
:new:           :dog:
:falls:         :falls:
:mainly:                :mainly:
:earth:         :deleted :
:on:            :on:
:the:           :the:
:plain:         :plain:
:test:          :deleted:
:new:           :cow:


for:

        StringDiff.diff( 
                "the rain in spain falls mainly on the plain",  
                "falls mainly on the plain the rain in spain"
        );
:new:           :falls:
:new:           :mainly:
:new:           :on:
:the:           :the:
:new:           :plain:
:new:           :the:
:rain:          :rain:
:in:            :in:
:spain:         :spain:
:falls:         :deleted:
:mainly:                :deleted:
:on:            :deleted:
:the:           :deleted:
:plain:         :deleted: