A stat that is compared with an enemy's agility to determine the likelihood that a character's blow will be a critical.
The higher an attacker's DEX, the greater their Critical Hit Rate against an opponent is.
Dexterity also has a direct impact on a character's accuracy stat. For every two points of DEX a character has, his/her accuracy is raised by one point. However, when using a Two-Handed Weapon, for every 4 points of DEX, your accuracy value is raised by 3. (as of the November '07 Update).
Dexterity also plays a significant role in determining the damage caused by Sneak Attack when used by a Thief.