How does a hair dryer change its motor speed? Diagram included
The "low" motor speed is instead realized by blocking every negative half cycle of the incoming AC with Diode 1. The "high" speed is realized by bypassing the diode.  
In this particular hair dryer the motor is never in series with the heating elements. 


I found your schematic particularly confusing, so I redrew it. In general, try do draw high voltage elements on the top and low voltage ones on the bottom side of the schematic. In this particular case the device is AC powered, so pick an orientation as you wish but stay with it. Signals (not present here) should generally flow from left to right.







simulate this circuit &ndash; Schematic created using CircuitLab

Regrettably SW1, SW2, the thermal fuse, the thermal cutout, the electrode and the motor have the wrong schematic symbols:  


SW1 is a three position rocker switch, model SR-71, function type "K". Its three positions are off(open circuit) - fan low(right side only) - fan high(both right and left sides connected to common).
SW2 is an identical three position rocker switch. Its three positions are cool(open circuit) - warm(right side only) - hot(both connected).