Tumblr is not a blogging platform like Wordpress, it's much more a community like Reddit. Yes, you can use Tumblr to host your blog, but the majority of people use the dashboard to interact with others and use their blog to share their content. Very few people will ever see username.tumblr.com, they'll see the posts via tumblr.com/dashboard. Like Twitter, very few people visit twitter.com/citricsquid, they follow me and see my tweets in their stream.
Dashboard is more like a "reader." Everybody you follow is found there. Also any tags you subscribe to are there. Interactions like replies are also found there. I'd compare it to your Facebook feed or Twitter.com stream. It's your base of operations.
Lots of read-only content, and then a decent amount of interactions and events (messages/new follows/like notifications).
The dashboard is where you primarily view all of the posts from the people you follow on Tumblr. Think of it in terms of what you view on Twitter, all of the Tweets from people you follow plus the ability to send out a new Tweet.
"dashboard" is their admin area?
So in theory 700 of their 1000 servers are for people to make a new post?
If I remember correctly, wp.com has a similar problem.