.dlg files are responsible for in-game dialogue. They contain both NPC and player dialogue, and are triggered through scripts.
A typical .dlg file.
The upper panel is the dialog 'Tree', which is basically just a laid out view of the conversation with NPC lines in red and the player's lines in blue. You can edit those lines in the bottom section.
Before I explain the image, there are a few things you ought to know:
1. Only TSL has a second slot for 'Conditional' and 'Script'.
2. The P1-P5(Parameter 1-5) and String Param ONLY apply to TSL - Parameters are set in scripts; the "script" box must contain the name of the script that contains the needed parameters.
3. The section at the bottom labelled 'Comments' is of use only to other modders and will not appear in-game.
It should be noted that it is not necessary for a line to have its string reference (StrRef) with it - it will still work in-game, it is simply advised so that others reading the files will be able to see the line in the dialog.tlk file. It is also not necessary to fill in the boxes for "Speaker" and "Listener" - the dialogue will still function without them.