DDS is a 3D graphics image format designed for using less VRAM when compressed compared to PNG as well as storing Mipmaps in the texture itself rather than seperately, thus improving performance on GPU's, especially helpful for mini PC's with APU's. DDS can end up taking more disc space than PNG's however and there are different formats for DDS but the 2 most commonly used are BC7 and DXT5 (DXT5 for compatibility, BC7 for quality).
important to note, on some occasions, DDS can break transparencies of textures making PNG the only viable option.
If you want to learn more about game dumping specifically for PCSX2 I made my own tutorial on my site.
https://sites.google.com/view/pcsx2-hd-textures-project/tutorial
Feel free to ask any questions on this thread.