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You downloaded an application for your Mac. It arrived as a DMG — a virtual disk image that mounts on your desktop like a phantom USB drive. Inside, you'll find an app icon and an arrow pointing to your Applications folder. Drag, drop, eject, done. It's elegant once you understand it and baffling the first three times.
DMG supports compression (making downloads smaller), encryption (protecting contents with a password), and checksumming (verifying nothing was tampered with during download). This makes it ideal for distributing verified software, which is why most third-party Mac developers still ship DMGs despite the Mac App Store existing. Under the hood, a DMG can contain any filesystem macOS understands — it's literally a disk, just not a physical one.
macOS opens DMG files natively — double-click, use the app, eject when done. If you're on Windows and someone sent you a DMG, 7-Zip can extract its contents (though you likely can't run the Mac app inside). DMG files are safe to delete after you've installed the application — the app lives in your Applications folder, not inside the disk image.
* Can extract contents