Generally they give you a bit of a speed and size boost over using standard texture formats. You need a program called "DXTex" that I think you can get from the Direct X developer site but I don't recall the exact location.
The way I've been using them is to texture your objects as normal in your 3D editing software (3DS Max, Milkshape, whatever) using your bitmap textures. Use DXTex to convert your original textures into the .dds format and then include just the .dds textures in your game folder. Dark Basic will use the .dds files instead of the bitmaps you originally textured with.
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