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: 
dll stands for "Dynamic Link Library". As the name implies, it is a collection of functions (libray) that is linked to your program dynamically during runtime (compared to static linking).
Generally dll contain only function. "Modern" .NET dll contain normal .NET objects.

Dlls can be registered. This process (e.g. regsvr32 N:\ame.dll) makes this dll known for the operating system. As an alternative, the dll can be placed in the same directory as the executable or in a directory in the Path. A second alternative is to load the dll via Windows API (LoadLibrary()).

The normal procedure is to register the dll during installation or just copy it in the same directory as the executable.
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>