What does Dither do in Cycles and what's the right value to set?
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Dithering is a post-processing step that reduces the banding caused by insufficient bitdepth by adding some controlled noise to the image.
Dithering set to 0:
Dithering set to 1:
With Blender's internal renderer, I almost always set it to 1 to avoid banding, but with Cycles, it's less useful because Cycles introduces its own noise anyway.
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$\begingroup$ Note, its possible to use Cycles in a way which avoids noise, so there may still be some use for dither, see: blenderartists.org/forum/…! $\endgroup$ – ideasman42 Apr 4 '14 at 0:29
