What is the meaning of DOP in the context of SQL Server?
DOP in SQL Server stands for Degrees of Parallelism.  

Per the MSDN article here, if SQL Server has multiple processors available, and the query meets certain thresholds, SQL Server will try and split up the query over multiple processors to increase its performance.

In earlier versions of SQL Server, I have seen parallelism actually make queries run slower; that is, the time to spend figuring out the parallelism takes longer than the actual query would take without it. 

In queries, you can specify the maximum number of processors to use by using the OPTION (MAXDOP X) query hint, where X is the maximum number of processors available.  You can turn off parallelism by using OPTION (MAXDOP 1).

There is also a known issue with parallelism and SCOPE_IDENTITY() in SQL Server 2005/2008.