Dr. Watson for Windows is a program error debugger that gathers information about your computer when an error (or user-mode fault) occurs with a program. Technical support groups can use the information that Dr. Watson obtains and logs to diagnose a program error. When an error is detected, Dr. Watson creates a text file (Drwtsn32.log) that can be delivered to support personnel by the method they prefer. You also have the option of creating a crash dump file, which is a binary file that a programmer can load into a debugger.
This article describes the Dr. Watson for Windows program error debugger tool included in Windows XP.
support.microsoft.com/kb/308538
This article describes how to disable and re-enable the Dr. Watson program for Windows.
support.microsoft.com/kb/188296
The short answer is a program running regularly on your system is crashing regularly. Each crash causes Dr. Watson to write a large "crash dump" file to disk for debug and analysis. The file extension i.e. type is ".dmp".
Fix or stop running the crashing program and no more .dmp files. Fix can mean install new or patched version or correct installation option or configuration errors or corrupted data file or a slew of other, less likely errors, e.g. IRQ conflict.