It was born out of reggae (particularly as a response to the frustrations Jamaicans felt when reggae's dreams of peaceful social justice weren't realized). It lit the fuse for hip-hop (which was based on dancehall's original form: "toasting" or rapping over DJ'd music). It has crossed over into American mainstream on more than one occasion (see: Shabba Ranks and Sean Paul). And it continues to be one of the driving forces in Jamaican popular music. The significance of dancehall music, in other words, cannot be overstated. But neither can the complexities of that significance.
Dancehall evolved in the 1970s out of actual dance halls: spaces in which DJs would play recorded music on their sound systems. Eventually, DJs like Yellowman, Clint Eastwood and Eek-a-Mouse became famous for toasting over the music, rapping improvised "slack" (or bawdy) lyrics that often poked hilarious fun at someone else over the beats. In the 1980s, the music was digitized (Wayne Smith and King Jammy's "Under Mi Sleng Teng" was the first fully computerized hit, and the sleng teng riddim became incredibly popular). Dancehall started taking on a faster, harder style that often came out swinging and focused on dancing and sex.
Since then, the genre has sprouted in many directions: Artists like Sean Paul and even Beenie Man have enjoyed mainstream crossover success, while other Jamaican artists like Damian Marley and Busy Signal have included dancehall as part of a diverse musical repertoire. The violence expressed in many songs has gotten a great deal of (warranted) negative attention, and disturbingly homophobic songs like Buju Banton's terrifying "Boom Bye Bye" deserve it. On the other hand, there's been a strong resistance to this kind of violence, even within dancehall, from "conscious ragga" artists like Tony Rebel and Sizzla (who allegedly even got Banton to sign his Reggae Compassionate Act, a pledge to move away from homophobia and other forms of violence). Overall, it makes for a complex, fascinating musical history -- and one seriously awesome playlist.