The best way to describe .dmg is to show you how to make one. Follow these directions: Open Applications->Utilities->Disk Utility. Then click on "New Image" and make a desired size and see how it works. The white disk uncompressed image can hold a program application, file, etc. Now drag that white disk image to the trash (make sure nothing you want to loose is in it). watch the trash can display an eject icon. Now, the compressed image is still there. This means you double click the compressed image again and see a new temporary uncompressed image appear.