DWDM uses up to 160 different colors (also known as lambdas or channels) to provide high-capacity bandwidth across an optical fiber network. Each lambda carries an individual optical signal providing the same bandwidth per channel (approximately 2.4G bit/sec with most of today's fiber) as a single light stream. Because each lambda is de-multiplexed at the end of the line, DWDM can be used to carry different types of data across the same line (for example, IP and ATM traffic).
Also see CWDM.
Additional resources
DWDM Tutorial
By the International Engineering Consortium.
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