The dictionary object holds data as key-value pairs, where keys can be arbitrary strings rather than numeric indices like in an array. It is used to store and retrieve data in QTP. Keys must be unique within each dictionary. Data is added using the Add method and retrieved using the Item method. If a non-existent key is used, a new key-value pair is added rather than resulting in an error. The dictionary has a CompareMode property to specify whether comparisons are case-sensitive.