The length for a typical dissolve is between three and five seconds, although they can be longer or shorter. A short dissolve (less than two seconds) is often used when a straight cut would be too jarring for the audience. A long dissolve (more than five seconds) is often used for montages or majestic shots.
In animation, each object and character is typically layered over a background. Each layer can be independently dissolved. For example, if a character is having a hallucination, the people they're imagining can dissolve in and out of existence to signify that they're not like other characters. This type of dissolve is often used for dreams and other altered states.
The significance of the dissolve is twofold: first, it softens the transition between scenes; second, it creates the feeling of time elapsing. The audience is eased from one shot to another without being taken "out of the moment." Dissolves have traditionally been used as transitions that show the passage of time.
Audio is also dissolved. Much like the way the opacities of two visual scenes are altered, the audio levels are also altered. The first level goes from full to zero while the second transforms from zero to full. This helps aid the strength of the dissolve.