DWDM, or Dense Wavelength Division Multiplexing, uses different wavelengths of light to combine multiple optical signals. This method allows for the transmission of various data streams simultaneously over a single optical fiber. By using closely spaced wavelengths, DWDM can fit more channels onto a single fiber, significantly increasing the capacity and efficiency of fiber-optic networks.

References: The explanation is based on the information available from the web search results on DWDM, which aligns with the principles outlined in the Cisco Service Provider source book.