Chapter 5 of Sepanski's Compact Lie Groups starts with this paragraph:
"Since a compact Lie group $G$ can be thought of as a Lie subgroup of $U(n)$, it is possible to diagonalize each $g\in G$ using conjugation in $U(n)$.
In fact, the main theorem of this chapter shows that it is possible to diagonalize each $g\in G$ using conjugation in $G$."
The first part of this paragraph, I believe, is due to the fact that $G$ has a faithful unitary representation, and also the spectral theorem which guarantees unitary diagonalizability of unitary matrices.
The second part of this paragraph is something that I have a little difficulty following. Consider for instance the compact abelian group $SO(2)$ as sitting inside $U(2)$. Then according to the above statement, every element of $SO(2)$, that is every rotation, can be diagonalized by a conjugation by a rotation!
Is the above quotation correct, or perhaps I am misinterpreting it?