DWDM is Dense Wavelength Division Multiplexing. "Dense" because it packs wavelengths closer together than previous wavelength division multiplexing methods.
Intuitively, a wavelength can be thought of as a particular ‘color‘. Many colors can be passed down a single fiber and then separated out at the receiving end back into its constituent colors. Each of those can in turn can be converted back into a digital signal.
The boards used at each end of a DWDM link are known as ‘transponders‘, which each converting a signal from normal ‘gray‘ optics into the specific color for the given channel. Today, most transponders are ‘tunable‘, meaning that a single board can generate any necessary given color under software control.
DWDM is used primarily in high-capacity long-haul networks. For shorter distances, the cost of the fiber is lower, so DWDM is not cost effective. Routers or switches are normally connected to the transponders and the DWDM link is transparent to those network nodes.
