Think of a DataSet object as a local in memory copy of database tables. With the client server model, client applications held onto a connection and updated and added records at will. With ADO.NET the dataset presents a disconnected model. Data as well as data changes are contained in the dataset with no physical connection to the datasource.
Changes can be reconciled against any datasource at any time.
A Dataset is not limited to database tables. It can work with XML or for that matter any other data.