The dodge mechanic works as a miss chance - a simple percentile chance to completely avoid physical attacks. You will see a "Dodge" hover over your character anytime it helps you dodge an attack.
 Dodge chance mechanic
This check is done independent of the miss chance resulting from Armor Class and other measures of not getting hit, such as Concealment or Incorporeality. The dodge chance is capped by the Maximum dexterity bonus of the armor worn, and cannot exceed 25%. There are some abilities (see below) which exceptionally allow to exceed this cap. Dodge bonuses from spells, enhancements, EDs, items, and feats stack.
As of Update 19, dodge bonuses on items no longer stack, only the best applies.
 Dodge bonus to Armor Class
Previous to Update 14, Dodge used to be considered a bonus type, generally applying to armor class and sometimes reflex saves. In some very rare areas where the devs forgot to update the bonus types, there are still a few abilities/items that display as dodge bonuses to armor class in the breakdown, but officially the system has been discontinued, so they should be considered bugs.
- Eldritch Shield Ritual and Eldritch Armor Ritual (Technically should count as bonuses types equal to their name per a dev post)
- Favored Defense I to III +1-3 (Ranger only, vs. favored enemies)
- Fighter's Mobility I to II +1-2 (fighter only, only while tumbling; requires Mobility feat)
 Sources of dodge
- Dodge: +3%
- Spring Attack: +2%
- Mobility: feat/item + 2% (also increases Maximum dexterity bonus by 2)
- Uncanny Dodge and Improved Uncanny Dodge grant + 1% at Levels 4, 6, 8, 12, 16, and 20 of Rogue or Barbarian, respectively. The bonuses from Uncanny Dodge and Improved Uncanny Dodge do not stack with one another.
- Uncanny Dodge provides also a clicky with temporary +25%, which ignores Dodge cap.
- Improved Uncanny Dodge provides also a clicky with temporary +50%, which ignores Dodge cap.
- Inspire Heroics +4% (level 15 bard buff)
- Flurry of Blows, when centered: +2%, +4% and +6% at monk levels 1, 2 and 4, respectively.
- Combat Archery passive: 2% if wielding a ranged weapon.
- Lesser Ocean Stance: +1%
- Ocean Stance: +2%
- Greater Ocean Stance: +3%
- Ultimate Ocean Stance: +4%
- Meld Into Darkness, active: +100% for 6 seconds, does currently not exceed the dodge cap (bugged). (Shadowdancer)
- Untouchable, passive: +1% extra dodge for each Shadow Charge held (Shadowdancer)
- Echoes of the Ancestors: Martial: Grandmaster of Flowers: passive, stance, 2% (Fatesinger)
- Echoes of the Ancestors: Primal (ranged version), passive: 1% (Fatesinger) (?)
- Perfect Balance, passive: 1% per rank, 3 ranks (Grandmaster of Flowers)
- Walking with Waves, passive: 1% per rank, 3 ranks (Grandmaster of Flowers)
- A Scattering of Petals, active: for 12 seconds: +25% (Grandmaster of Flowers)
- Master's blitz, active: 10 seconds + can be prolonged by killing monsters: +50%, does currently not exceed the dodge cap (bugged). (Legendary Dreadnought)
- Unearthly reaction, passive: 1% per rank, 3 ranks (Magister)
- In the weeds, passive: 1% per rank, 3 ranks (Shiradi Champion)
- In the weeds, passive, when standing still: additional 1% per rank, 3 ranks (Shiradi Champion)
- Named items: up to 10%
- Random loot:
- Cannith Crafting: 1-2%
 Dodge stacking
Depending on the order you equip your dodge items, the final result may not be correct. Try stripping off and re-equipping in a different order. DDO Forum thread
The Dodge bonus from items no longer stacks (as of update 19). Only the highest item based Dodge bonus will apply.