Basically it is a service on a fileserver where you create a share, and mount other shares inside of it.

if you have g: \\server\share1 h: \\server\share2 i: \\server\share3

the user connects to the \\server\dfsshare map as s: (for example) and in then sees
s:\share1 s:\share2 s:\share3 etc.

those shares(1-3) can come from any server on your lan

You are effectively changing share letters into folder structure... think of it kind of like the win95 issue of shared home folders. The user connects to a share where all their resources are located inside of it.