In simple terms a dwell angle is the percentage of time the points are closed over the whole rev range and not just one point when setting the points. The bigger the dwell the smaller the spark due to the coil not being for enough time to charge up. Over time the cams wear on your distributor which is why it's important to set the points and then check the dwell angle is within VW's tolerances. Sometimes this can mean setting the points as they should and then having to reset them.
It's effectively the amount of time (roughly measured in degrees of dissy shaft rotation, for want of anything better) that the contact breakers are closed for each of the four cylinders. Current flows through the coil with the breakers are shut, so it's really the amount of time the coil has to "charge up" it's magnetic field...how much energy gets stored in the coil. When the breakers open, the field collapses and generates a pulse of high voltage to fire one of the plugs. Too short a dwell time means a weaker field, and a weaker spark. It's usual to ignore dwell angle and adjust the same thing just by setting the points gap. It's all pretty crude stuff. Fancy dissys like the 123 actually drive the coil with a constant current and vary the dwell according to engine speed, so it doesn't overheat.
