Lets say that $\mathbf{e}_1$,$\mathbf{e}_2$ (in the simplest case) are eigenvectors (not basis vectors) for $A$, so $A\mathbf{e}_1= \lambda_1\mathbf{e}_1$ and $A\mathbf{e}_2= \lambda_2\mathbf{e}_2$. Because $P$ has columns which are these eigenvectors, it maps $\mathbf{i}$ to $\mathbf{e}_1$ and $\mathbf{j}$ to $\mathbf{e}_2$ (where $\mathbf{i}$ and $\mathbf{j}$ are the standard basis of $\mathbb{R}^2$). Then $P^{-1}$ must map $\mathbf{e}_1$ to $\mathbf{i}$ and $\mathbf{e}_2$ to $\mathbf{j}$.
Then the composition $PDP^{-1}$ maps $\mathbf{e}_1$ to $\mathbf{i}$ to $\lambda_1 \mathbf{i}$ to $\lambda_1\mathbf{e}_1$, and similarly $\mathbf{e}_2$ to $\lambda_2\mathbf{e}_2$: it maps the two eigenvectors of $A$ to the same things as $A$ does - so it $\it is \rm$ $A$, provided the eigenvectors of $A$ form a basis of $\mathbb{R}^2$ (if this isn't the case, you can't diagonalise $A$).