Definition from Wiktionary, the free dictionary
From Latin -illus.
-illo (feminine counterpart -illa)
- Added to masculine nouns to denote a diminutive form.
Usage notes 
- If the noun has a final vowel (usually -o), it is dropped before adding -illo.
- In most cases, -illo is used simply to indicate a small or endeared thing, without changing the basic meaning of the noun; however, in some cases, it is used to effect a greater change in meaning, such as bolsillo (“pocket”), from bolso (“handbag, purse”).
- Different nouns tend to prefer different diminutive suffixes (see synonyms below), though some nouns accept multiple diminutives and there is often regional or personal variation.
- For masculine nouns ending in “-a”, there is some alternation between the gender-reflecting diminutive -illo and the ending-reflecting diminutive -illa. When the latter is used, -ill- may be considered an infix.