Distinction bias was introduced by Hsee and Zhang (2004) as an explanation for why people evaluate objects differently when evaluating them jointly, as opposed to separately. Hsee and Zhang found out that when people are in joint evaluation mode, they find more distinctions than they would otherwise. As a result, when they make a choice, they will be evaluating this choice in comparison with the other possible decisions, and overestimating how much the distinctions between the two choices are affecting their happiness.
Say, for example you are choosing between two apples. Both look good, but one looks slightly fresher than the other. However, you drop the fresh one, and must eat the other one. Normally, you wouldn’t find the lack of freshness problematic. However, because of distinction bias, you would now find the apple unpleasantly old, and enjoy it less than you would otherwise.