"Dialog" is here a regular form that have its properties set initially for common values when this form is to be displayed modally with ShowDialog method, this is the type of dialog that user have to finish with before returning to use other parts of application. Have a look at what values there are for properties FormBorderStyle, ShowInTaskBar, MaximizeBox, MinimizeBox and StartPosition. It also by default have added 'ok' and 'cancel' buttons which are linked to this forms properties AcceptButton and CancelButton, this will return specific DialogResult values form the ShowDialog call.
So it basically comes down to being a template based on form to save you a little work for common settings, it's the same with several of the other form templates, they reflect common settings you would add anyway to make a regular form a Mdiparent form or an About form etc.