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I want to make sure my understanding of the Bargain Hunter skill feat is correct.
In PFS Organized Play, I can make an Earned Income check with Diplomacy instead of being limited to Craft, Lore, and Performance.
I can also purchase gear by making a Diplomacy check to reduce the cost in addition to making Earned Income? For every item, such as if I want to by a +1 sword for 35 gp, make a BH check, the item is reduced to 31 gp and I also get the 4 gp as Earned Income.
I am not sure what else this feat can provide in PFS otherwise?

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You can Earn Income using Diplomacy, spending your days hunting for bargains and reselling at a profit. You can also spend time specifically sniffing out a great bargain on an item; this works as if you were using Earn Income with Diplomacy, except instead of gaining money, you purchase the item at a discount equal to the money you would have gained, gaining the item for free if your earned income equals or exceeds its cost.
I can understand the confusion, but I am pretty sure that the word "also" simply means you can choose to do either or, not both.
So you can either Earn Income, or purchase an item at a discount.
Functionally, there's really no difference between the two. The main benefit is opening up Diplomacy for Earn Income.