Question: What is a DLL? What is it doing in our computer? Why we need to register it? Is DLL registration a common process of a single command? Is this installed/registered while we are installing a software?

Answer: 
A dll is a library of functions that can be used by other programs. Not all dll's need to be registered, that applies only to those that expose their fuctionality as [COM](http://en.wikipedia.org/wiki/Component_Object_Model) objects.

Dll's can come from many places; a good number of them make up Windows as such, others come as part of various software that you install. Microsoft Office, for instance, registers dlls that exposes COM interfaces that allows other applications to incorporate functionality from the Office applications.
Let's not forget rundll32.exe. This Windows utility allows you to invoke a function exported in a dll. <http://support.microsoft.com/kb/164787>