Being dilated means that your cervix has started to open in preparation for the birth of your baby. Your cervix must go from not dilated to 10 centimeters dilated before your baby can be born. While many of us this of this as a process of labor, many women will be dilated, even if just slightly, prior to the beginning of labor.
Effacement or being effaced is about the thinness of your cervix. During your pregnancy your cervix is roughly three-five centimeters long. Effacement is a measure of how thin it is and is measured in percentages. So a cervix that is not effaced is 0%, half effaced is 50% and completely effaced is 100% effaced.
The big question that you may have about being dilated is whether or not that means that your baby is likely to be born soon. While being dilated is certainly a positive step towards labor, in and of itself it is not a sign of labor or even that labor is coming in a certain amount of time. In the absence of contractions, being dilated is just preparing for labor.
Think about it this way, if you are 36 weeks pregnant and your practitioner finds that your cervix is 1 centimeter dilated - that means your cervix is open the width of approximately a Cheerio. This does not mean that your baby's birth is impending, but it is one less centimeter than you have to do in labor.
So sit back and relax as much as you can while you wait for the real signs of labor.
The Labor Progress Handbook. Simkin, P and Ancheta, R. Wiley-Blackwell; 2 edition.