The document discusses directed acyclic graphs (DAGs) and how they can be used to represent basic blocks of code. It describes how a DAG is constructed from three-address statements, with nodes labeled by variables, operators, or unique identifiers. Interior nodes represent computed values and leaves represent variables or constants. The DAG construction process creates nodes and links them based on the statements. DAGs are useful for detecting common subexpressions, determining which variables are used in a block, and which statements compute values used outside the block. Array accesses, pointers, and procedure calls require additional rules when constructing DAGs to properly capture dependencies.