An alt label is used by screen reader software to desribe an image to users with visual impairmants. Alt labels also appear if images are turned off. Internet Explorer displays the alt label when you roll over the image.
When you insert an image in Dreamweaver, you may see a box for alt text in the dialog box. (You can turn this feature on or off in Edit -> Preferences in the Accessibility section.)
After you have inserted an image, you can add or change the alt label by selecting the image and entering the label in the Property Inspector.
What makes good Alternative Text?
Good Alt text will clearly describe the image to a blind user so the content of the page is conveyed with as much detail as is necessary. If the image is a title or button, the alt text should repeat the text in the image. Some images are included just to make the page look pretty, so alt text for decorative images should be empty (alt="").
See this About.com article for more details.