A DMG file is a proprietary disk image format used on Mac OSX versions 10 and higher.
The format, like its Windows counterparts (DAA, C2D, ISO, PDI), allow for password protection and file compression.
DMG files are distributed over the Internet and when clicked on, will mount as a drive within Mac Finder.
Disk Utilityand DMG can also be created to burn CD and DVD images.
Disk image files for Mac OS 9 or lower are normally in SMI format.