What is dielectric constant and how does it explain the reason why water is one of the best solvents
The dielectric constant $\epsilon$ (known also as permittivity) is a measure of the extent to which a substance is polarized under an applied (external) electric field. Polarization amounts to net separation of charge across the substance. A "dielectric" is the common name used to refer to a substance placed between the plates of a capacitor and used to store electrical energy in the form of polarization, that is, as charges separated across the material. A capacitor is the non-chemical analogue of a voltaic cell, that is, a form of storing electrical energy.

A substance with a high dielectric constant is easily polarized. Polarization allows countercharges to be placed around an ion, resulting in Coulombic interactions between solvent and ion, promoting solubilization of the ion by competing with interionic interactions. Similarly, a polar solvent - one with a high dielectric constant (relative permittivity $\epsilon_r&gt;\approx15$) - will solubilize polar molecules by forming stabilizing interactions with the solute that compete with solute-solute interactions. 

Water is a good solvent for polar molecules for the above-mentioned reasons. Water is sometimes referred to as the "universal" solvent, but it is generally a good solvent for polar solutes, not apolar ones.