Difficulty Levels

Easy:

Fewest escorts: Flower-class Corvette escorts only
Poor enemy gun accuracy: Start encounters with attack angle of no more than 60° from front
50% chance of enemies spotting torpedo: 7 resupply points
25 torpedoes: 10 decoys

Adds Fletcher-class Destroyer escorts: Increases escort count
Adds one additional escort if convoy has a whale: Start encounters with attack angle of up to 90° from front
Enemies can detect periscope 33% faster: 75% chance of enemies spotting torpedo
Increased distance at which torpedoes can be spotted: Increased enemy gun accuracy
Can't repair external damage when submerged: 5 resupply points
20 torpedoes max: 7 decoys max

Adds convoy zig-zagging: Increases escort count
Adds one additional escort for each whale in convoy: Start encounters with attack angle of up to 120° from front
90% chance of enemies spotting torpedo: Increased distance at which torpedoes can be spotted
4 resupply points: 15 torpedoes max
5 decoys max

Encounters start further from convoy: Start encounters with any random attack angle
Torpedo targeting computer disabled: Adds dud torpedoes ()
Removed display of enemy search state: Removed visible sonar pings/bounces
No notifications of sub/periscope/torpedo spotted: Halves ship speeds to real-world speeds
4 resupply points: 15 torpedoes max
5 decoys max

In a Custom game, you can set a bunch of difficulty options:

Convoy Zig-Zags: Convoys will change heading every 90 - 120 seconds.: Dud Torpedoes: Adds a 12.5% chance of a torpedo failing to detonate on impact.
Auto-Targeting: Enable the automatic torpedo solution calculator.: Visible Sonar: Displays sonar pings/bounces in Chart view.
Search Timer: Shows enemy search state as LED and rotary timer at top left under clock.: 2x Ship Speeds: Doubles all ship speeds (this is the game's default).
Show Depth Charges: Display markers around depth charges.: Chart View Ships: Show 3D ship models in Chart view.