DWDM is one of the two types of WDM, the other being CWDM (coarse).
Imagine you've gone to all the trouble of laying a fibre network. Hooray! Then you start torrenting and you run out of bandwidth. Do you run more fibre? No, you multiplex different light frequencies down the same fibre you've already run.
In normal TDM systems, each fibre transports optical signals by using a single laser. WDM involves simultaneous transmission of multiple signals at different wavelengths over a single fibre. Modern implementations are usually a combination of TDM/WDM.
Typically SDH will run over WDM (usually in the same equipment - see
Alcatel,
Nortel,
Ericsson(PDF) and
Siemens) into which everything else runs over, but many vendors are releasing equipment that allows IPoDWDM (see
Cisco) for lots of converged goodness