DAG stands for Database Availability Group, which is a new architecture in Exchange 2010. With the DAG deployed, the mail system has high availabilty and site resilience.
Take my project as an example, we have two Exchange mail servers. One of them is in the ShangHai office and the other is in Chicago office. And each mail server hosts two databases. SH DB means the database of ShangHai office, CHI DB means the databases of Chicago office.
With the DAG in place, the databases in the two sites backup each other. To improve the efficiency, we make the DB for local office as the primary DB. For instance, the ShangHai users use the SH DB on SH Mail server for their daily work. And meanwhile, the SH DB on CHI Mail server sychronize with it at the background. If a fault happens to the SH DB or even the SH Mail server, the ShangHai users still can continue to access their data. The only difference is that the DB is in another place.
Here are some good links talking about DAG: