In the first variation, the third phrase is played as in the theme, but then its repetition is diminished. See below, the diagonal lines aligning the two phrases. In the second last measure, G5 is introduced as an escape tone -- the step up/third down figure (here, F5-G5-E5) is one of the most common embellishments in 17th century music, both vocal and instrumental.
The pattern continues in the second variation: the third phrase from *variation 1* is played, and then further diminished as the fourth phrase. See below. In phrase 3, note that the third in the escape tone has been filled in (second last measure of phrase three); so, F5-G5-(F5)-E5. In phrase 4, the figure is further extended to reach A5 as a neighbor to G5.
Thus, there are four different versions of the phrase 3/phrase 4 group: (1) in the theme; (2) in the first variation; (3) the very slightly varied version in the second variation, phrase 3; and (4) in the second variation, phrase 4. The result gives a concise picture of ^2 arising out of the diminution of ^7.
Reference for the title: Jacob van Eyck, Der Fluyten Lust-hof, edited by Winfried Michel and Hermien Teske (Winterthur: Amadeus Verlag, 1984).