To dither is to be indecisive. But that's not the way I'm using the word here. In PhotoshopSpeak, dithering mixes the pixels of the available colors to simulate missing colors.
Dithering is useful to a weaver for simulating a large range of colors with a small number of weave structures and/or yarn colors. Moreover, dithering adds an interesting depth of visual texture and shading to large flat areas, as in the following pictures from today's weaving: