A Dummy helper object is a wireframe cube with a pivot point at its geometric center. It has a name but no parameters, you can't modify it, and it doesn't render. Its only real feature is its pivot, used as a center for transforms. The wireframe acts as a reference for transform effects.
The dummy object is used primarily in hierarchical linkages. For example, you can use a dummy object as a center of rotation by linking a number of different objects to it. When you rotate the dummy, all of its linked children rotate with it. A dummy is often used this way to animate linked motion.
Another common usage of a dummy object is in the animation of target cameras. You can create a dummy and position a target camera within the dummy object. Then you can link both the camera and its target to the dummy, and animate the dummy with a path constraint. The target camera will follow the dummy along the path.
Dummy objects are always created as cubes. You can change the proportions of dummies by using non-uniform scaling, but avoid this on dummies that are within a hierarchical linkage; this can introduce unexpected results.