Compare With->Each Other is grayed out because only 1 file is selected. Select both files and right-click to Compare With->Each Other, it should now be enabled. This is foolish but it led me to google it, which led nowhere. After 5 minutes, I realized, it need the other file to be selected.
About the author
Xuan Ngo is the founder of OpenWritings.net. He currently lives in Montreal, Canada. He loves to write about programming and open source subjects.