Dimensionality can be seen as the number of possible columns in a database. Imagine a dataset containing information about customers, such as age, gender, location, and purchase history. The dimensionality of this dataset would be the number of these attributes, which determines the complexity of analyzing and understanding the dataset as a whole.
For observability, dimensionality represents the number of unique fields present in logs, traces or wide events. High dimensionality datasets are important in observability as they enable you to add as much data to a single event / log / span, each field giving you more context about the behaviour of your application.