Dungeons are underground chambers with cobblestone walls. They usualy contain some chests with items (for players to collect) and a Mob Spawner. Dungeons are possibly the only place that saddles can currently be found, as well as mossy cobblestone and mob spawners.
Dungeon Game Mode
Dungeon may be an upcoming game mode planned by Notch. Not much is known about it, but it will be like Survival mode. The player won't build blocks, only destroy some of them. It has also been said it will have new mobs and puzzles. It is planned to be released after the game.